UOB KH highlights Tai Sin Electric's strong free cash generation
Analyst: Loke Chunying
• Maintain BUY and target price of S$0.435
• More than 100% jump in 3QFY14 net profit. Despite a dip in revenue (-4.5% yoy), adjusted profit before tax for 3QFY14 jumped 155.3% to S$5.6m attributable mainly to an expansion in gross margins from 15.3% in 3QFY13 to 19.9% in 3QFY14.
According to the Building & Construction Authority, an increase in construction demand from the industrial, institutional and civil engineering sectors is expected to offset the drop in demand from the residential segment.
Construction demand is expected to remain strong with S$31b-38b worth of contracts to be awarded in 2014. (FY13P: S$35.8b). Management is also optimistic on the outlook for its distribution segment, with the growth in the electronics industry likely to drive the segment’s profitability.
The latest 9MFY14 earnings continue to affirm Tai Sin’s excellent growth record (FY02-FY13 net profit CAGR 26.7%). We continue to like Tai Sin for its strong growth record, solid balance sheet, robust cash flow generation and attractive dividend yield.
With local construction demand expected to remain strong and with new upcoming public sector projects (eg. HDB’s electrical infrastructure upgrade plans and Singapore Power’s S$2b transmission cable tunnel project), we believe Tai Sin is able to continue with its stable earnings growth.
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