Wednesday, 16 October 2013

Tee International

OCBC on 16 Oct 2013

Tee International’s 1QFY14 PATMI dipped 67.5% YoY to S$0.9m mostly due to S$1.9m in unrealized foreign currency losses and a S$2.8m spike in admin expenses. The increase in admin expenses consist of a one-time S$1.1m incentive payment to employees, S$0.7m from the newly acquired integrated turnkey material-handling subsidiary, and staff costs from a higher headcount. 1QFY14 PATMI constitutes only 4.1% of our FY14 forecast and we judge this quarter to be a miss. That said, if we adjusted for the one-time incentive payment and currency losses, core PATMI is estimated at S$5.6m which would have made up 25.0% of our forecast and been in line. Our fair value estimate dips to S$0.35, versus S$0.38 previously, as we lower our FY14 PATMI forecast down by 26% to S$16.6m. Downgrade to HOLD.

1QFY14 PATMI down 68% YoY
Tee International’s (Tee) 1QFY14 PATMI dipped 67.5% YoY to S$0.9m mostly due to S$1.9m in unrealized foreign currency losses and a S$2.8m spike in admin expenses. The increase in admin expenses consist of a one-time S$1.1m incentive payment to employees, S$0.7m from the newly acquired integrated turnkey material-handling subsidiary, and staff costs from a higher headcount. 1QFY14 PATMI constitutes only 4.1% of our FY14 forecast and we judge this quarter to be a miss. That said, if we adjusted for the one-time incentive payment and currency losses, core PATMI is estimated at S$5.6m which would have made up 25.0% of our forecast and been in line. In terms of the topline, 1QFY14 revenue came in at S$68.8m – up 124.3% YoY mainly due to increased contributions from engineering projects and a S$10.0m bump from development projects.

Current engineering order book at S$99.4m
The current outstanding order book for the engineering segment is S$99.4m and we understand that the group continues to be focused on securing new projects. In addition, Tee’s associates also have an outstanding order book of S$75.7m in Malaysia and Thailand for its telecommunication engineering and wastewater treatment businesses. The group’s real estate segment currently has contracted sales of S$66.0m and S$19.8m for its residential property development projects in Singapore (excluding associates) and Thailand, respectively.

Issue price of scrip dividend scheme at S$0.305
Tee also announced that the issue price for new shares under its scrip dividend scheme will be S$0.305. We believe this allows shareholders who are looking to re-invest dividends into the counter to do so conveniently, and also enable the group to retain such capital for allocation into future opportunities. Our fair value estimate dips to S$0.35, versus S$0.38 previously, as we lower our FY14 PATMI forecast down by 26% to S$16.6m. Downgrade to HOLD.

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