ECS Holdings (ECS) reported a 4.5% YoY increase in its 3Q13 PATMI to S$8.7m on the back of a 11.4% jump in revenue to S$999.3m. After adjusting for forex and other exceptional items, we estimate that core earnings would have increased 4.7% YoY from S$8.7m to S$9.1m. This was in-line with our expectations. Looking ahead, we expect ECS to benefit from new product launches by major IT vendors in which it has established a strong working relationship with, such as Apple and Lenovo. We finetune our assumptions and raise our fair value estimate from S$0.56 to S$0.585 as we roll forward our valuations to 6x FY14F EPS. Maintain BUY, as valuations remain undemanding, with the stock trading at FY14F P/NTA of 0.55x and PER of 5.6x.
3Q13 results met our expectations
ECS Holdings (ECS) reported a 4.5% YoY increase in its 3Q13 PATMI to S$8.7m on the back of a 11.4% jump in revenue to S$999.3m. After adjusting for forex and other exceptional items, we estimate that core earnings would have increased 4.7% YoY from S$8.7m to S$9.1m. This was in-line with our expectations. On a segmental basis, ECS’s core Enterprise Systems and Distribution segments saw YoY sales growth of 32.3% and 4.2% to S$322.8m and S$668.4m, respectively. For 9M13, revenue rose 18.5% to S$3,107.1m, forming 73.1% of our FY13 forecast. Reported PATMI grew 14.9% to S$25.9m, while estimated core earnings climbed 7.8% from S$22.7m to S$24.5m, or 75.3% of our full-year forecast.
Deepening its relationship with major IT principals
Looking ahead, we expect ECS to benefit from new product launches by major IT vendors in which it has established a strong working relationship with. One example is Apple, which launched its iPad Air in Nov this year. We also expect some contribution from Apple’s iPhone 5S, but to a smaller extent given the Android operating system’s continued market share gains. Lenovo, another important IT vendor of ECS, highlighted during its recent 2QFY14 analyst briefing that it expects its core PC business to benefit from the corporate refresh cycle and gradual recovery in China’s PC market. This will provide a boost to ECS’s prospects, in our view. Meanwhile, industry watcher Gartner also forecasted IT spending to grow 5.5% and 8.7% in Asia-Pacific and China in 2014, respectively.
Maintain BUY
We finetune our assumptions after taking into account this latest set of results, and raise our fair value estimate from S$0.56 to S$0.585 as we roll forward our valuations to 6x FY14F EPS. ECS’s share price has performed well since we highlighted it as our top pick in the tech sector on 15 Jul 2013, rising 13.5%, as compared to the STI’s 1.0% decline during the same period. Maintain BUY, as valuations remain undemanding, with the stock trading at FY14F P/NTA of 0.55x and PER of 5.6x.
ECS Holdings (ECS) reported a 4.5% YoY increase in its 3Q13 PATMI to S$8.7m on the back of a 11.4% jump in revenue to S$999.3m. After adjusting for forex and other exceptional items, we estimate that core earnings would have increased 4.7% YoY from S$8.7m to S$9.1m. This was in-line with our expectations. On a segmental basis, ECS’s core Enterprise Systems and Distribution segments saw YoY sales growth of 32.3% and 4.2% to S$322.8m and S$668.4m, respectively. For 9M13, revenue rose 18.5% to S$3,107.1m, forming 73.1% of our FY13 forecast. Reported PATMI grew 14.9% to S$25.9m, while estimated core earnings climbed 7.8% from S$22.7m to S$24.5m, or 75.3% of our full-year forecast.
Deepening its relationship with major IT principals
Looking ahead, we expect ECS to benefit from new product launches by major IT vendors in which it has established a strong working relationship with. One example is Apple, which launched its iPad Air in Nov this year. We also expect some contribution from Apple’s iPhone 5S, but to a smaller extent given the Android operating system’s continued market share gains. Lenovo, another important IT vendor of ECS, highlighted during its recent 2QFY14 analyst briefing that it expects its core PC business to benefit from the corporate refresh cycle and gradual recovery in China’s PC market. This will provide a boost to ECS’s prospects, in our view. Meanwhile, industry watcher Gartner also forecasted IT spending to grow 5.5% and 8.7% in Asia-Pacific and China in 2014, respectively.
Maintain BUY
We finetune our assumptions after taking into account this latest set of results, and raise our fair value estimate from S$0.56 to S$0.585 as we roll forward our valuations to 6x FY14F EPS. ECS’s share price has performed well since we highlighted it as our top pick in the tech sector on 15 Jul 2013, rising 13.5%, as compared to the STI’s 1.0% decline during the same period. Maintain BUY, as valuations remain undemanding, with the stock trading at FY14F P/NTA of 0.55x and PER of 5.6x.
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