EITA is a homegrown elevator manufacturer and leading
distributor and manufacturer of Electrical and Electronics (E&E) components
and equipment. Its products are sold locally as well as overseas in countries
like Thailand, Singapore, Bangladesh, Brunei, UAE, Germany, Hong Kong and
India. While its future prospects are good, EITA faces the same volatility as
the construction sector with its project focused business model. We value EITA
at RM0.81, pegged to 7x FY12 EPS.
Quality above the
rest in a niche market. EITA differentiates itself by producing its own
inhouse brand of specialized E&E products, including EITA-Schneider Elevators, FURUTEC busducts
and ballast systems. It has gained a foothold in the upstream business by
building brands that are synonymous with quality and safe elevators and
solidifying its reputation as the preferred distributor for many well-known
E&E products. We like EITA's R&D initiatives,which ensure that its
product quality is on par with international standards, and consistently meet
the changing needs of its customers. EITA will be the first elevator manufacturer to seek a
listing on Bursa Malaysia.
Targeting a growing
demand. EITA plans to enhance its already solid Elevator and Busduct portfolio
by actively bidding for projects locally and around the region. It is also targeting to capture more
opportunities in the elevator
maintenance and refurbishment markets
where earnings are more stable, given the average cycle for replacement
of elevators in buildings of 20-25 years.
Armed with a wide distribution network, EITA is set to capture further opportunities
in the local market which is estimated at a potential value of RM700m.
Reputable Management
and shareholders. EITA's business is supported by a team of skilled
managers and an E&E technical workforce with many years of experience in
Malaysia. The Chia family, which are its largest shareholders, are the same
management team behind QL Resources and Boilermech Holdings, two other public
listed companies in Malaysia. We believe EITA will uphold strong corporate
governance for the benefits of its shareholders.
Fair value at RM0.81.
We remain neutral on the prospects of EITA's manufacturing and distribution
segments owing to the cyclical nature of
this business and given that
the expected revenue contribution from its high-speed elevators may only
materialize in the long term. Our valuations are based on 7.0x FY12 EPS
against the weighted average E&E industry PER of 7.0x. This translates into a fair value of RM0.81, representing a
6.0% potential upside from the listing price of RM0.76. The company has
recommended a dividend payout of 30% for FY11, which translates into a dividend
yield of about 3.9%.
Source: OSK188
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