We attended the company’s post-result briefing recently and went
away feeling neutral on the company’s outlook in the short term. EITA Resources
posted a better set of results in 2Q12 as compared to 1Q12 due to higher sales
contribution from all its three business segments (manufacturing of elevators
as well as Busduct, marketing and distribution of E&E components and
maintenance contract services and sales repair). However, the slowdown in the
manufacturing sector may affect the group in the next 3-6 months although it
will still be able to ride on
the expected growth of 3.8% YoY
from the construction sector in CY12. We think that the group with its
homegrown products and well strategised management will be able to take the
company’s business to a higher level.
EITA has a dividend
payout policy of 30% of its NP. Based on our earnings estimates, we expect
EITA to dish out 3.5sen and 4.1sen DPS for FY12 and FY13 respectively. These translate into yields of
4.9% and 5.7% respectively. We value EITA Resources at a TP of RM0.95 based on
6.9x PER - this being the FY13 average PER of small cap industrial stocks -
over our FY13 EPS forecast
of 13.7sen. We
do not have
an official coverage on the
company, hence the “Not Rated” rating.
Snapshots of 2Q12
results. On a QoQ basis, EITA Resources posted an increase of 39.3% to
RM56.1m and 22.6% to RM5.5m in its 2Q12 revenue and PBT respectively due to a
better revenue contribution from all its three business segments, i.e. the
manufacturing of elevators and Busducts (+64.7% QoQ), the marketing and
distribution of E&E components (+21.5% QoQ) and services of maintenance contracts
and repair sales (+32.8% QoQ). However, due to the oneoff listing expenses of
RM1.08m, the consolidated PBT of the
group was lower at RM4.4m (from RM5.5m) in 2Q12. On a YoY basis, the group’s
1H12 revenue increased by 29.9% to RM96.3m and its PBT by 21.2% to
RM10.0m.
Expecting 10%-20% YoY
growth of earnings in FY12. Management expects a 10%-20% YoY growth in the
bottom line (from RM12.7m in FY11), while the top line is expected to grow
around 30% YoY. However, we
are only forecasting
a 15% growth
in revenue as the group’s manufacturing division could
be affected by the slowdown in the global economy, especially from the Eurozone in the next few months.
Nonetheless, the management reckons that the resilient local construction
sector should provide a certain degree of support to the group’s growth.
According to our in-house forecasts, the construction and manufacturing sectors
are expected to grow by 3.8% and 4.4% in 2012 from 3.5% and 4.5% in 2011
respectively.
Order book mainly
from the manufacturing of elevators. As of Jun 2012, the group has secured
a RM101.4m order book with 75% of it from the manufacturing of elevators, 19%
from the manufacturing of Busducts and 6% from maintenance services and repair
sales. The elevator’s order book is mainly from the domestic market at RM74.3m (such
as from Kerjaya Hotel (RM7m), Glomac Damansara B (RM4m), Platinum (RM4m) and
Tigaman Square (RM3m). Meanwhile, its Busduct’s order book at RM13.6m is mainly
from the overseas market (e.g. Singtel Phase 2, Singapore (RM6m), National Art
Gallery (RM5m) and Tower 1263, Kuwait (RM1m).
Source: Kenanga
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