DMG & PARTNERS RESEARCH on 2 Jul 2012
WE initiate coverage with a "buy" rating and TP of $1.28. We estimate that the net profit of this small-cap is set to grow +12.6 per cent compounded annual growth rate over FY2011-2014F, driven by strong industry spending, and capacity expansion in Vietnam.
Technics has two existing yards in Batam and Singapore with revenue capacity of $250-300 million. The company has entered into an agreement to acquire an existing private yard in Vietnam for a maximum consideration of $10 million that will double their revenue capacity.
Technics' business model requires very limited capex and generates strong operating cash flow. Balance sheet is healthy with a net gearing of 0.28x. In FY2010 and FY2011, the company paid 10.5 cents and 12.0 cents dividends respectively, and management is guiding for eight cents dividend payout for FY2012F. This translates into a yield of 8.6 per cent.
We expect Technics to build a stronger foothold in Vietnam after the purchase of the new yard in Vung Tau. Key risks are project execution, erosion in pricing power for EPCC projects, and delay in award of projects.
BUY
BUY
No comments:
Post a Comment