Tee International (TEE) reported that its 3QFY12 revenue fell 60% YoY to S$25.4m, but PATMI jumped 146% YoY to S$1.8m. The lumpy nature of its engineering work resulted in a bumper year in FY11, when a couple of TEE’s bigger projects were rushed to completion. Although management remains confident of its outlook, especially with TEE’s engineering order book gaining S$37.6m to S$245m at end-3QFY12, TEE is unlikely to meet FY12 consensus estimates. Consequently, we revised our estimates of TEE’s FY12 revenue and PATMI by 22% and 41% lower respectively to S$152.8m and S$11.8m. In tandem with our new estimates, we downgrade TEE to a HOLD rating with a new fair value estimate of S$0.28/share, from S$0.36/share previously.
Lumpy project execution hits financials
Tee International (TEE) reported that its 3QFY12 revenue fell 60% YoY to S$25.4m, but PATMI jumped 146% YoY to S$1.8m. The lumpy nature of its engineering work resulted in a bumper year in FY11, when a couple of TEE’s bigger projects were rushed to completion. Management confirmed that the lower revenue in 3QFY12 is the result of the completion of these projects. On the other hand, our calculations show TEE’s PATMI increase can be partly attributed to one-off gains of S$0.5m, from one-off losses of S$0.2m a year ago.
Likely to miss consensus estimates
With a chunk of its FY12 revenue brought forward to 4QFY11, TEE’s YTD financial performance has been disappointing. Although TEE remains confident of its outlook, especially with its engineering order book gaining S$37.6m to S$245m at end-3QFY12, TEE is unlikely to meet FY12 consensus estimates. TEE’s 9MFY12 revenue of S$104.1m only met 53% of our full-year estimate and 46% of consensus full-year estimate, while its 9MFY12 PATMI of S$7.7m only represents 38% of both our and consensus full-year estimates. Consequently, we revised our estimates of TEE’s FY12 revenue and PATMI by 22% and 41% lower respectively to S$152.8m and S$11.8m.
CAD investigations on key personnel
Separately, TEE last week disclosed that its non-executive chairman Mr. Bertie Cheng, and Mr. CK Phua, its group CEO and managing director, are currently under investigations by the Commercial Affairs Department (CAD) on possible contravention of market rigging provisions. Both Mr. Cheng and Mr. Phua have indicated they will cooperate fully with the CAD in its investigations. Although TEE reassured investors that its business operations are not affected by the CAD investigations, the investigations will likely cause some downward pressure to TEE’s share price in the near term.
Downgrade to HOLD
After lowering our revenue and PATMI estimates, we downgrade TEE to a HOLD rating with a new fair value estimate of S$0.28/share, from S$0.36/share previously.
Tee International (TEE) reported that its 3QFY12 revenue fell 60% YoY to S$25.4m, but PATMI jumped 146% YoY to S$1.8m. The lumpy nature of its engineering work resulted in a bumper year in FY11, when a couple of TEE’s bigger projects were rushed to completion. Management confirmed that the lower revenue in 3QFY12 is the result of the completion of these projects. On the other hand, our calculations show TEE’s PATMI increase can be partly attributed to one-off gains of S$0.5m, from one-off losses of S$0.2m a year ago.
Likely to miss consensus estimates
With a chunk of its FY12 revenue brought forward to 4QFY11, TEE’s YTD financial performance has been disappointing. Although TEE remains confident of its outlook, especially with its engineering order book gaining S$37.6m to S$245m at end-3QFY12, TEE is unlikely to meet FY12 consensus estimates. TEE’s 9MFY12 revenue of S$104.1m only met 53% of our full-year estimate and 46% of consensus full-year estimate, while its 9MFY12 PATMI of S$7.7m only represents 38% of both our and consensus full-year estimates. Consequently, we revised our estimates of TEE’s FY12 revenue and PATMI by 22% and 41% lower respectively to S$152.8m and S$11.8m.
CAD investigations on key personnel
Separately, TEE last week disclosed that its non-executive chairman Mr. Bertie Cheng, and Mr. CK Phua, its group CEO and managing director, are currently under investigations by the Commercial Affairs Department (CAD) on possible contravention of market rigging provisions. Both Mr. Cheng and Mr. Phua have indicated they will cooperate fully with the CAD in its investigations. Although TEE reassured investors that its business operations are not affected by the CAD investigations, the investigations will likely cause some downward pressure to TEE’s share price in the near term.
Downgrade to HOLD
After lowering our revenue and PATMI estimates, we downgrade TEE to a HOLD rating with a new fair value estimate of S$0.28/share, from S$0.36/share previously.
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