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Core Pacific – Yamaichi International (H.K.)* says Techcomp's valuation is attractive

Felix Kwok & Eugene Mak

Currently, Techcomp has 180 sales personnel and 14 liasion offices in key cities in the PRC such as Guangzhou, Shanghai and Beijing. The PRC government directly or indirectly funds 70% of Techcomp’s PRC sales.

Transferring shares to Hong Kong Market. Techcomp listed in Hong Kong by introduction in Nov 2011 and is currently dual listed in Hong Kong Exchange and Singapore Exchange (SGX) (stock code: TCH SP).

As no new shares were issued when listing in Hong Kong and very few shares were transferred to Hong Kong Market, there is a 25% premium to Singapore share price.

In our opinion, more Singapore investors will convert their shares over to Hong Kong improving liquidity in Hong Kong.

Current valuation has significant discount over peers. Techcomp is trading at 11x FY11 PER (8.8x for TCH SP) and 1.5x FY11 PBR (1.2x for TCH SP).

For the peers, the top 10 scientific equipment producers and other peers with similar market cap are trading at 18.4x FY11 PER (excluding Perkinelmer) and 17.9x FY11 PER, respectively.

Techcomp enjoys stable top-line growth and it could see improved profit margin in its manufacturing segment.

Including the factor of 40% industrial sector premium on FY11 PER for Japanese and the U.S. over HK market, the current valuation still has a significant discount over the peers.

Taking out the one-off listing expenses of US$2.8mn, the net income for FY11 was US$11.2mn, up 6.6% yoy, accounting for 7.3% net profit margin, which beat the peers with similar market cap.

Given the story of stable top-line growth with improving margin, we believe the current valuation is attractive.

Downside risks: (1) Policy changes in PRC; (2) Austerity reforms in Europe are stricter than expected; and (3) Wage and raw materials inflation is more than expected.

* Core Pacific – Yamaichi International (H.K.) is an investment banking specialist with deep roots in the Greater China region.

Recent story: TECHCOMP: Record US$11.2 m profit in 2011 after adjusting for one-offs


DMG maintains 'buy' and 36-cent target price for Adampak

Analysts: Edison Chen & Terence Wong CFA

Chua Cheng Song, CEO, Adampak

Adampak posted its 4Q11 results with a net loss of US$0.2m which is in line with our estimates.

Taking away the one-off impairment charges, full year core PATMI fell 30.0% YoY to US$6.5m mainly attributable to the reduction in sales as a result of the Thai flood disruption.

Full year dividends of 2.0S¢ is also in line with expectation.

Moving on, we expect the group to restore its production capability in Thailand by April, in time for its customer’s recovery.

Subsequently, we expect the group’s second half performance to be strong and the full year dividend to recover back to 3.0S¢.

Maintain BUY with an unchanged TP of S$0.36 based on our Discount Dividend Model (Key assumptions: WACC: 9.7%, Terminal growth rate: 0.0%).

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#9 1000 2012-03-10 03:49
HK is trading at 3.19 now. This is equal to 51.4 cents in singapore money. A 15% premium to singapore price. wasted i sold too early.
#8 Freshman2012 2012-03-09 09:58
Hi, I am new to the market. if i buy the shares with cpf, can i transfer the shares to hk?
#7 chuajk1965 2012-03-09 05:14
The cost of per transfer is affordable. The difference in the share price more than compensate for the costs involved.

I asked my HK friends to check and they said Core Pacific is a instit house. So funds are expected to buy soon.
#6 Morpheus 2012-03-08 16:34
Still got legs to run. Trading at 15% discount to the HK price today.
#5 Stephen 2012-03-08 14:12
SG side got trading today -- 212,000 shares changed hands, stock went up to close at 44.5 cents. Action has just started!!!Q
#4 Benf2209 2012-03-08 11:51
like that i am going to move my shares to hk liao. sg side got not trading leh
#3 Beng2209 2012-03-08 11:50
techcomp closed 3.08 hkd today with 320,000 shares traded. how come the volume over hk is so much more than sg, tot they do listing with no share placement
#2 chuajk1965 2012-03-08 07:28
It takes about 10 days to transfer over the shares to Hong Kong. I will buy some to try.
#1 Moneyface 2012-03-08 07:04
Techcomp is trading at a 25% premium to Singapore share price. Is there a arbitrage opportunity here?

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