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Investors’ Corner
Investors' Corner | 15 August 2008
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Fibrechem Technologies
Price – $0.58 Target – $0.79

Its uniform microfibre leather will be Fibrechem Technologies’ (FT) new growth driver with revenue CAGR of 23% from FY07 to FY10F. Its newest product, low melting point bi-component short fibre, will also start contributing in FY09F and is forecasted to grow by 41% to HK$260m in FY10F. Revenue growth will be strongest in FY09F at 46% on the back of higher capacity for bi-component long fibres and new products that also include differential polyester chips. The average selling price of uniform microfibre leather is also forecasted to rise by 4%. Competition is not as intense as its strategy is to focus on segments that are not well served. Total revenue CAGR from FY07 to FY10F is estimated at 25%. We believe that at 6x FY08F PE, FT trades at a premium to its Singapore peers due to its differentiated product offerings. Its average historical PE since IPO is 9.5x. TP is discounted at 8x FY08F PE due to weak market sentiment. Initiate with BUY. – AmFraser (11 Aug)

Olam Int’l
Price – $2.25 Target – $2.60

Olam Int’l’s $300m share placement in Apr-08 and US$300m CB issue in Jul-08 saw net debt-equity ratio reduced from 4.8x to 3x while adjusted gearing ratio fell from 1.5x to 0.9x, which should provide sufficient funds to finance its working capital needs and make acquisitions of up to $700m. Overall, Olam’s acquisitions is performing credibly and the combination of organic and inorganic growth should lift net earnings by 38% in FY09E, although EPS growth is lower at 22% due to dilution. After the placement, ROE falls because of a higher equity base. Post placement, the FY08 NAV/shr would rise from $0.38 to $0.55. The stock rallied, shortly after the placement, from 3.6x the new NAV to 5.5x but corrected back to about 4x, which suggests that the market is pricing in the lower ROE. We value the stock at 4x FY09E NAV (4.7x FY08E NAV) using GGM, assuming long-term sustainable ROE of 20% and long-term growth of 5% with COE of 10.7%. Upgrade to NEUTRAL. – Merrill Lynch (11 Aug)

PSL Hldgs
Price – $0.145 Target – $0.305

PSL Hldgs’ (PSL) revenue surged 109% in 1H08 to $39.5m, accounting for 62% of our FY08’s forecasts. Revenue from Piling and Engineering Services increased 158% to $19.6m while Trading and Equipment Rental registered revenue growth of 76% to $19.9m on a robust construction sector. Gross profit increased 122%, achieving GPM of 23.3%. PSL remains fairly optimistic that margins will not be severely eroded as we understand that it is not exposed to rising steel prices as steel rebars are supplied by the main contractors. Sales and gross profit also outgrew expenses in 1H08. We raised our revenue forecasts by 33% for FY08F, reduced our GPM assumptions to a conservative 22% to reflect rising labour and diesel cost, leading to a 6% rise in our FY08F earnings to $8.4m. We value PSL at an unchanged 5x FY08F PE. Our TP translates to 1x FY08F P/B. With the share trading at 0.7x FY08F P/B, it represents an upside potential of 110%. Maintain BUY. – Westcomb (12 Aug)

Yangzijiang Shipbuilding (Hldgs)
Price – $0.63 Target – $1.30

Yangzijiang Shipbuilding (YZJ) delivered NPAT of Rmb709m (+115% YoY) in H108 with a revenue of Rmb3.4b (+145% YoY). EPS of Rmb0.21 is in line with our estimate of Rmb0.20. Given a stronger H2, we expect YZJ to meet our full-year forecast of 79% earning growth to Rmb1.55b. We note that gross margin contracted in Q208. Besides cost pressure from steel, we believe it also related with margins of vessels delivered and under construction during Q2. According to the production schedule, YZJ will book revenue and cost of high margin vessel in H2, which will mitigate margin pressure. YZJ requires upfront payment of at least 20% together with a bank guarantee for a further 20% before effecting the contracts and doesn’t expect any cancellation of orders. Based on US$7.4b orderbook value as of H108, YZJ has an EV/orderbook ratio of 0.14, well below the regional peer average of 0.43. Our TP is based on 2.6x our 2009 estimated book value. Maintain BUY. UBS Investment (13 Aug)

Yangzijiang Shipbuilding (Hldgs)  1.050 -0.030 -2.78%   
Business: Co is one of the largest non-state owned shipbuilders in China. [FY18 Turnover] Shipbuilding (58.1%), trading (32.8%), investments (6.7%), others (2.4%).

Insight: Apr-19, 1Q19 revenue jumped 26.8% to Rmb6.3b due t... Read More


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