TAI SIN ELECTRIC: 6% dividend yield, 51-c target price

Excerpts from analysts' reports

UOB Kay Hian: TAI SIN ELECTRIC is an "attractive dividend play with a positive outlook"

Analyst: Loke Chunying

VALUATION

• Maintain BUY but with a higher target price of S$0.51 pegged to 9.6x FY15F PE. The higher target price is due to higher valuation of its regional peers. Tai Sin is currently trading at an undemanding valuation of 7.1x FY15F PE with a solid balance sheet (2.5% net gearing) and dividend yield of 6%.

FINANCIAL RESULTS

• Excluding one off items (such as loss on disposal of subsidiary and foreign exchange losses), FY14 PBT grew 26% yoy to S$27.1m due to an expansion in margins. The expansion in margins was due to a rise in contribution from the Test & Inspection (T&I) (+5.8% yoy) and cable segments (+3.6% yoy) which have higher margins than the distribution segment (-5% yoy).

• Strong free cash flow generation, as the group generated S$14.5m free cash flow (free cash flow yield: 9%) for FY14. Net gearing remained low at 2.5%.

• Final dividend of S$0.015 maintained. Together with its interim dividend of S$0.0075 (which has been paid out), Tai Sin has declared a total dividend of S$0.0225 for FY14, representing a 45% payout, and attractive yield of 6%.

INVESTMENT HIGHLIGHTS

Cable production at Tai Sin Electric's factory in Gul Crescent, Singapore. Photo by Leong Chan Teik• Business demand remains strong. Despite the property cooling measures, local construction demand is expected to remain strong underpinned by infrastructure projects.

This bodes well for Tai Sin’s cable and T&I segments which are closely related to local construction demand. Contracts for projects such as Singapore Power Cable Tunnel, new airport terminal and Thomson Line are expected to be awarded by the end of 2014.

• T&I segment- rising from the bottom. The T&I segment has reversed from an EBIT loss of S$0.7m in FY13 to an EBIT profit of S$2.1m in FY14.

This is due to the shift towards the more profitable phase of an onerous contract (signed by the previous owner) in 2HFY14. Going forward, profitability of the T&I segment is expected to continue improving, underpinned by cost efficiencies from operations consolidation. The job scope of the T&I segment includes soil investigation for MRT tunnels and concrete cube testing, which are required to be done by law.

• Our view. Since our initiation, the stock has gained 15.7% (inclusive of dividends). We continue to like Tai Sin for its excellent earnings track record and attractive dividend yield. Trading at 7.1x FY15F PE with a dividend yield of 6% and a strong balance sheet of 2.5% net gearing, we believe Tai Sin still offers great value to investors at current levels.

Recent story: TAI SIN -- Target 43.5 C, "On Track For 4th Consecutive Year Of Earnings Growth"

Counter Name	Last	Change
AEM Holdings	2.390	0.030
Best World	2.470	0.020
Boustead Singapore	0.940	-0.015
Broadway Ind	0.127	0.001
China Aviation Oil (S)	0.920	-0.010
China Sunsine	0.420	0.005
ComfortDelGro	1.480	-0.010
Delfi Limited	0.885	-0.025
Food Empire	1.280	-
Fortress Minerals	0.310	-
Geo Energy Res	0.300	-0.005
Hong Leong Finance	2.530	0.020
Hongkong Land (USD)	3.210	-
InnoTek	0.545	-0.005
ISDN Holdings	0.300	-0.005
ISOTeam	0.044	-
IX Biopharma	0.047	0.004
KSH Holdings	0.250	-
Leader Env	0.052	0.002
Ley Choon	0.049	-
Marco Polo Marine	0.069	-0.001
Mermaid Maritime	0.141	-
Nordic Group	0.315	-
Oxley Holdings	0.086	-
REX International	0.128	-0.004
Riverstone	0.790	0.005
Southern Alliance Mining	0.485	0.055
Straco Corp.	0.485	-
Sunpower Group	0.215	0.010
The Trendlines	0.065	-
Totm Technologies	0.022	-
Uni-Asia Group	0.840	0.020
Wilmar Intl	3.210	-0.020
Yangzijiang Shipbldg	1.720	-0.040

Counter Name

Last

Change

AEM Holdings

2.390

0.030

Best World

2.470

0.020

Boustead Singapore

0.940

-0.015