Excerpts from latest analyst reports...
AmFraser keeps 'buy' call on TECHNICS OIL & GAS
Technics Oil and Gas is paying up to $10 million for a fabrication and engineering plant in Vietnam to expand its presence there. The deal will also give Technics, a specialised maker of customised equipment used in oil and gas exploration and production, an edge in bidding for major projects in Vietnam that require local content, said Technics executive chairman and group MD Robin Ting.
The company will fund the acquisition using existing cash resources and, possibly, bank borrowings.
VOFE's purpose‐built fabrication and engineering complex is the only such complex in Vietnam's Vung Tau city that is privately owned. It has a load‐out facility of 10 tonnes per square metre and a 5,000 deadweight tonnage jetty, Technics said.
VOFE is mainly engaged in the business of processing and manufacturing equipment for the oil and gas and maritime industries. The company is licensed to import and export oil and gas equipment under Vietnamese law.
We currently have a BUY call on Technics with a $1.22 FV. Further, we expect a dividend of 8 cents to be declared this coming quarter, equivalent to a very attractive yield of 8.7%.
NRA Capital maintains 'neutral' on ANWELL TECHNOLOGIES
Analyst: Jacky Lee
Loss wider than expected. 1Q12 core net loss of HK$137m was more than double our HK$56m net loss forecast. The key variance were lower-than-expected sales (its turnkey project for solar will be recognised only when completed), lower-than-expected GPM (its 1Q12 solar sales were mostly trading activity, which commands much lower margins, and its own production solar panels are used in the turnkey project), higher-than-expected depreciation due to more aggressive depreciation cost on OLED equipment and interest expenses.
Cutting forecast and fair value. We reversed our FY12 forecast from net profit HK$12m to net loss of HK$173m to factor in the higher-than-expected costs. As a result, our fair value has been lowered by 8 cents to S$0.23, still pegged at to 9x FY12 EV/EBITDA. However, we maintain our Neutral rating for the time being as we need time to observe how its solar turnkey projects perform.
More downstream work on its solar road map. Anwell, along with other makers of solar panels, is affected by a dramatic plunge in panel prices due to a boom in the construction of solar panel factories, together with lower demand in Europe.
Given the oversupply issue and intensive price competition for its solar business, going forward, the group aims to evolve beyond its established position as a thin film solar panel manufacturer to become an EPC contractor, providing integrated solutions under the Build, Operate and Transfer (BOT) model for large-scale solar projects.
The group believes such a strategy will allow them to expand its solar business platform and further strengthen its position in the solar industry. Management is also confident its cost competitiveness, coupled with support from the PRC government will allow them to survive. Anwell should be able to reduce its cost further from US$0.52/watt currently to US$0.45/watt when its Dongguan plant is ready.
NRA has 'outperform' on DMX TECHNOLOGIES
Analyst: Jacky Lee
Earnings below expectations. DMX 1Q12 net profit of US$2m (+4% yoy) was 45% below our US$3.7m expectation due mainly to lower-than-expected sales and higher-than-expected operating cost (staff strength rose from 570 at end of December FY2011 to 608 currently).
Cutting forecasts but upgrade to Overweight. Backed by an outstanding order book as at end March-2012 of US$73.8m (+8.8% yoy). We believe its revenue will show a healthy growth for this year. However, margins could continue to be compressed near-term as staff strength continues expanding.
As a result, we lower our net profit FY12-14 estimates by 14%, 9% and 7% respectively. Our fair value has been lowered from S$0.31 to S$0.27, still based on 12x FY12 PER (lower range of its 8 years rolling forward PER).
However, we believe the weaker-than-expected performance has been priced in, and given the 22% upside, upgrade our recommendation from Neutral from Overweight.