Tee International

OCBC on 25 Jul 2012

Tee International (TEE) yesterday released its FY12 financial results. Its FY12 PATMI grew 11% to S$19.3m, beating consensus estimate by 32%. This is in spite of the 43% slide in its revenue to S$143.6m. After recording 9MFY12 PATMI of only S$7.7m, TEE turned it up with a record quarterly PATMI of S$11.6m in 4QFY12. The record quarterly PATMI in 4QFY12 can be attributed to 1) an increase in operating margin, probably due to profit recognised from TEE’s property development, and 2) asset valuation gains at the associate level. However, TEE’s profit recognition from property development should remain lumpy, and the one-off asset valuation gains are unlikely to repeat. Thus, we maintain our fair value estimate of S$0.28/share and HOLD rating on TEE.

FY12 PATMI beat estimates
Tee International (TEE) yesterday released its FY12 financial results. Its FY12 PATMI grew 11% to S$19.3m, beating consensus estimate by 32%. This is in spite of the 43% slide in its revenue to S$143.6m, or 13% below the street’s expectation. In addition, management has recommended a final dividend of 1.25 cents/share and a special dividend of 0.50 cents/share, exactly the same as a year earlier.

Record quarterly PATMI in 4QFY12
After recording 9MFY12 PATMI of only S$7.7m, TEE turned it up with a record quarterly PATMI of S$11.6m in 4QFY12. The strong quarterly PATMI in 4QFY12 can be attributed to 1) the increase in operating margin from 13.7% to 16.3%, which is probably due to profit recognised from TEE’s property development projects, and 2) asset valuation gains at the associate level, helping TEE’s share of JVs & associates to grow more than 300% to S$5.1m in 4QFY12. However, TEE’s revenue and profit recognition from property development should remain lumpy from quarter to quarter; and the one-off asset valuation gains at the associate level are unlikely to repeat.

Robust order book
TEE revealed that its engineering segment currently has an order book of S$213.5m, and its associates in Malaysia and Thailand have a combined order book of S$81.0m. Separately, TEE’s integrated real estate segment has contracted sales of S$53.4m in residential property development projects, while its Thai associates have contracted a further S$14.4m in property development sales.

Maintain HOLD
We believe that TEE’s record quarterly PATMI in 4QFY12 was boosted by lumpy property development profits and one-off valuation gains at the associate level. In particular, the valuation gains are unlikely to repeat. Thus, we maintain our fair value estimate of S$0.28/share and HOLD rating on TEE.