We initiate coverage on Libra Group as our conviction BUY in the small-cap space with a fair value estimate of S$0.33. Based on an analysis of this M&E specialist’s order book, upcoming FY14 earnings is forecasted to increase a whopping 8.0 times YoY to S$4.7m. We further forecast FY15 earnings to grow 68.0% YoY to S$7.8m as the new management team, who took over operations in 1Q14, continues to expand and position the company to capitalize on the healthy public construction outlook. We highlight that this under-the-radar company is already showing initial signs for an earnings upswing: 1H14 earnings had jumped 218.1% YoY to S$3.0m. We believe Libra represents good value here at only 2.7x FY15 forward P/E (versus a peer average of 7.4x), and particularly so as the group’s dividend yield is forecasted to jump dramatically from 1.6% last year to 8.1% in FY14 and 9.7% in FY15. Our fair value estimate of Libra is based on an undemanding 4.8x forward FY15 PE, which represents a 35% discount versus its peer average. Increased visibility of Libra’s earnings and dividends growth ahead will likely form compelling re-rating catalysts for its share price, in our view.
Earnings forecasted to grow 8x in FY14 and 68% in FY15
We initiate coverage on Libra Group Ltd (“Libra”) as our conviction BUY in the small-cap space with a fair value estimate of S$0.33. Given our analysis of this M&E specialist’s order book, upcoming FY14 earnings is forecasted to increase a whopping 8.0 times YoY to S$4.7m. We further forecast FY15 earnings to grow 68.0% YoY to S$7.8m as the new management team, who took over operations in 1Q14, continues to expand and position the company to capitalize on the healthy public construction pipeline. Our fair value estimate of Libra is based on an undemanding 4.8x forward FY15 PE, which represents a 35% discount to the industry peer average of 7.4x.
Already showing initial signs of earnings upswing
We highlight that this under-the-radar company is already showing initial signs for an earnings upswing: 1H14 earnings had jumped 218.1% YoY to S$3.0m. The new management team, which includes majority shareholder and executive Chairman/CEO Mr Chu Sau Ben, took over day-to-day operations in 1Q14 and is rapidly gaining traction in terms of growing business volumes (including the upstream main contractor segment), leveraging on the firm public construction outlook in Singapore (forecasted at S$14b-18b per annum over FY15-16), and strengthening margins through active rationalization of business costs and operations.
Good value here with key re-rating catalysts ahead
We believe Libra represents good value here at only 3.4x FY14/15 blended P/E and 2.7x FY15 forward P/E (versus a peer average of 7.4x FY15 PE). In addition, Libra’s dividend yield is forecasted to jump dramatically from 1.6% last year to 8.1% in FY14 and 9.7% in FY15. Looking ahead, we expect increased visibility of Libra’s earnings and dividends growth – particularly through new order wins and upcoming FY14 results – to form compelling re-rating catalysts for its share price. Initiate with BUY and S$0.33 fair value estimate.
We initiate coverage on Libra Group Ltd (“Libra”) as our conviction BUY in the small-cap space with a fair value estimate of S$0.33. Given our analysis of this M&E specialist’s order book, upcoming FY14 earnings is forecasted to increase a whopping 8.0 times YoY to S$4.7m. We further forecast FY15 earnings to grow 68.0% YoY to S$7.8m as the new management team, who took over operations in 1Q14, continues to expand and position the company to capitalize on the healthy public construction pipeline. Our fair value estimate of Libra is based on an undemanding 4.8x forward FY15 PE, which represents a 35% discount to the industry peer average of 7.4x.
Already showing initial signs of earnings upswing
We highlight that this under-the-radar company is already showing initial signs for an earnings upswing: 1H14 earnings had jumped 218.1% YoY to S$3.0m. The new management team, which includes majority shareholder and executive Chairman/CEO Mr Chu Sau Ben, took over day-to-day operations in 1Q14 and is rapidly gaining traction in terms of growing business volumes (including the upstream main contractor segment), leveraging on the firm public construction outlook in Singapore (forecasted at S$14b-18b per annum over FY15-16), and strengthening margins through active rationalization of business costs and operations.
Good value here with key re-rating catalysts ahead
We believe Libra represents good value here at only 3.4x FY14/15 blended P/E and 2.7x FY15 forward P/E (versus a peer average of 7.4x FY15 PE). In addition, Libra’s dividend yield is forecasted to jump dramatically from 1.6% last year to 8.1% in FY14 and 9.7% in FY15. Looking ahead, we expect increased visibility of Libra’s earnings and dividends growth – particularly through new order wins and upcoming FY14 results – to form compelling re-rating catalysts for its share price. Initiate with BUY and S$0.33 fair value estimate.
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