Excerpts from latest analyst reports…..
UOB Kay Hian says valuation of WORLD PRECISION MACHINERY ‘is attractive’
Analyst: Jonathan Koh CFA
World Precision Machinery (WPM) has secured land use rights for a 3.9m sf plot of industrial land within the Shenyang Economic and Technological Zone.
WPM will pay Rmb123.3m for the land use rights, which will last for 50 years. According to management, the land use rights were acquired at below market price.
According to management, the purchase of land use rights will be funded by internally generated resources. WPM has already injected US$10m or Rmb66m when it incorporated World Precise Machinery (Shenyang) Co Ltd in Dec 10.
Steady inflow of new orders. WPM has over 2,000 customers and it receives orders on a daily basis. It currently secures orders at a rate of Rmb100-120m/month, in line with target revenue growth of 30-40% in 2011. WPM’s orderbook has increased from Rmb270m in Feb 11 to the current Rmb428m.
We reduce our net profit forecast for 2011 by 2.1% due to interest expense and amortisation for land use rights. We also trim our net profit for 2012 by 4.8% due to start-up expenses for the new Shenyang plant in 2H12.
Valuation/Recommendation
Maintain BUY. Valuation is attractive with WPM trading at 7.4x 2011F PE and P/B of 1.5x. Our 12-month target price is S$1.07, based on 12x 2011F PE.
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DMG ups target price of CHINA MINZHONG to $2.28
Analysts: Tan Han Meng CFA, CPA & Terence Wong CFA
Reported 3QFY11 net profit was up 93% to RMB261m (3QFY10: RMB135m) on the back of 34% revenue increase to RMB704m (3QFY10: RMB524m) and 6ppt GPM gain to 47%.
MINZ enjoyed better ASP that saw stronger sales and margins for both processed and fresh segments. 9MFY11 revenue and net profit made up 76% and 92% of our previous full-year estimates (9M10: 80% and 73% of FY10A) respectively.
We now assume higher GPM of 41% and 40%, and farmland acquisition of 35,000 mu p.a. (old: 30,000 mu p.a.) over FY11-FY12.
Correspondingly, our earnings estimates are revised upwards by 9% each to RMB562m-RMB805m – 14% and 22% above consensus respectively. Our new derived TP of S$2.28 (old: S$2.08) is pegged to 9x blended FY11F/12F P/E and represents 29% upside potential.
At 7x blended P/E, we continue to like MINZ’s attractive agriculture thesis and believe share price will react positively to its earnings momentum. Maintain BUY.
CIMB says OKP’s target price is 98 cents
Analyst : Gary Ng
1Q11 net profit of S$5.2m (+49% yoy) surprises the street! This strong set of number in a normally slow1st quarter came in despite a slow turned in revenue of S$32.8m, which was affected by lower revenue from the maintenance segment due to the completion of existing projects.
The translation into net profit was not due to any one-off item but sheer project management skills and tighter cost controls. This set of result cements OKP’s position as a market leader in public infrastructure works in Singapore. 1Q11 EPS (after adjusting conversion of warrants) is in-line with our expectation, and accounted for 25% of our FY11 EPS.
• OKP’s current S$376m order book can last till FY2014. OKP’s total gross order book stands at a healthy S$375.8m based on secured civil engineering and construction contracts, with projects stretching up to 2014.
Year to date, OKP’s total new order wins (three public sector projects totaling S$94.4m) already made up 63% of our higher than consensus 2011 new order book assumption (S$150m).
• Maintain BUY. Our estimates are unchanged and target price remains at S$0.98, peg 10x CY12 earnings, below the mid-cycle valuation, and discount to bigger peers who re-rated upon awards of overseas contracts.
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China Mobile Satellite Communications Group in tie-up with Thuraya of Dubai
The following are excerpts from a press release by China Mobile Satellite Communications Group, which is the target of a M&A by Singapore-listed Armarda Group:
China Mobile Satellite Communications Group Limited (CMSCG) targets robust growth in the PRC mobile satellite communication market as it develops the industry in exponential pace with Thuraya Telecommunications Co. (“Thuraya”), the UAE-established leading global GEO satellite mobile telecommunication operator.
Both parties have signed a partnership agreement where CMSCG will be the only distributor for Thuraya’s satellite mobile telecommunication devices as well as the one and only provider of Thuraya’s satellite mobile telecommunication services in China.
In addition, Thuraya will be providing full-scale extensive technical and marketing support to CMSCG as it seeks to expand its operations in the PRC market.
“We are extremely pleased that we have secured Thuraya as our strategic partner. Thuraya is one of the world’s largest MSS providers. According to our preliminary survey, there are over 3 million potential satellite voice and data users in China. Obviously, full penetration will take over a few years.
"We are currently targeting 300,000 government and institutional users in our first three years of operations. We are also in advanced negotiations with one of the mobile telecom providers in China to market Thuraya’s dual mode (satellite and GSM/CDMA) phones to high end retail customers,” said Mr Zhang Jianhua, Chairman & CEO of CMSCG.
“We are currently in M&A discussions with Singapore-listed Armarda Group Limited and the progress is on track”, Mr Zhang added.
Recent story: ARMARDA acquires 45% stake in China Mobile Satellite Communication Group