Excerpts from latest analyst reports....

Kim Eng Research says SAMKO TIMBER may not benefit entirely from Japan wood demand

Samko surged to 24.5 cents this morning. In May, Temasek Holdings agreed to take up S$7 million worth of new Samko shares at 13.62 cents a share in exchange for 100% of a bio-tech company controlled by Temasek.

Analyst: James Koh

Samko Timber Limited is one of the largest timber processing companies in Indonesia and the world. It currently ranks among the world’s top five tropical hardwood plywood producers.

It was listed on the Singapore Exchange in February 2008 but has suffered losses every year since then.

Recent development: From its 1Q11 results, there are signs that the company has turned around and posted a profit. It would be the first quarter since June 2008 that the company is in the black (excluding foreign exchange gains).

More time needed. Strong demand from China and Japan’s reconstruction efforts could fuel demand for timber and push up prices. However, Samko may not benefit entirely from this trend, as it is currently in midstream processing which is a margin/fee business. Any upstream efforts will take time to bear fruit.

Check out NextInsight forum postings on Samko Timber here.


DMG reiterates buy call on EU YAN SANG

Analysts: Melissa Yeap, Terence Wong CFA

Richard Eu, CEO, Eu Yan Sang.

We met up with CEO Richard Eu this morning and here are some of the key takeaways:  

1) EYS intends to leverage on HZL’s extensive distribution network of 127 retail stores in Australia by placing its products on their shelves. Likewise, it will be retailing some of HZL’s Healthy Life’s products in its stores.

The objective is to offer customers a wider variety of products and to transition from a pure TCM company to a health wellness company.

2) Although HZL has only three HealthyLife outlets in Shanghai, it owns the Aurinda brand which is sold through 1,600 retail counters in China. The Aurinda brand consists of more than 45 vitamin and dietary supplements products.

3) Management does not rule out a Hong Kong listing if its China business does well or if it further engages in another M&A. We continue to recommend BUY on EYS with a TP of S$0.99.

Recent story: EU YAN SANG: A night of gastronomic delight


CIMB captures Q&A highlights of DUKANG presentation to invetsors

What capital expansion is planned for coming year? About 60-65% of the proceeds from Dukang’s TDR listing will be used over the next 2 years to expand grain alcohol production capacity, acquiring adjacent land for construction of new facilities and setting up its representative office in Taiwan.

Does Dukang view Taiwan as a key market? Dukang views Taiwan as important more for brand enhancement and international exposure, rather from a consumer sales standpoint, as the bulk of Dukang’s demand will still be from PRC. Furthermore, Dukang’s Taiwan office can be used as a platform for potential expansion into other markets such as Japan and Southeast Asia.

How does Dukang’s premium gross profit margin compare with competitors? Dukang’s Jiuzu line has a margin of about 45%, which is much less than established premium brands like Maotai and Wuliangye which has margins up to 100%. However, as a new entry to the premium baijiu market, Jiuzu has lots of potential for growth and increased margins.

What is the outlook for baijiu compared to other alcoholic drinks in PRC? It’s a common misconception to view baijiu as a sunset industry. Currently, baijiu has about 60% market share of the PRC alcoholic beverage market and sales are growing at about 30% per annum, compared to about 10% per annum for beer.

Any dividend declared? Currently, Dukang is not planning to declare any dividends as they are currently in a period of aggressive capital expansion. Dukang’s normal dividend policy is about 5-20% of current year’s profits.

Read our report on the growth drivers: DUKANG DISTILLERS: 3 strong growth drivers

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