Excerpts from analyst's report
RHB analyst: Jarick Seet
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| ♦ 92-c target implies 13.4 FY17F ex-cash PE |
 "With its strong balance sheet and a business that is anticipated to generate substantial positive cash flow from operations, coupled with its potential M&A plans to further boost earnings, we have a conviction BUY on Acromec. Our DCF-backed TP of SGD0.92 implies 13.4x FY17F ex-cash P/E." -- Jarick Seet (photo) |
Robust 2-year NPAT CAGR growth of 54% ahead. Acromec’s stellar 1H16 results indicate that it may continue performing well in the future, due to its pipeline of potential projects and future growth plans.
This is in line with the main reason behind its IPO back in April – to raise cash for its rapid expansion to capture the future strong and fast incoming growth.
As the robust healthcare sector in Singapore is set to expand rapidly in the next few years, Acromec will continue to deliver stellar results and explosive NPAT earnings CAGR of 54% in FY16F-18F.
Bright prospects ahead – much larger contracts on the horizon. The company has managed to strengthen its foothold in the healthcare sector and currently has a tender book of about >SGD200m. Its future potential projects would be much larger in value, and may be individually worth SGD50m-100m.
| Acromec | |
| Share price: 63 c |
Target: 92 c |
It has the manpower as well as the balance sheet to tender and cope with such large-sized projects. Acromec already has a proven track record with various government organisations like A-Star, National University of Singapore and other hospitals – this gives it an advantage and boosts its credibility when tendering for contracts.
Initiate coverage with BUY and a DCF-backed TP of SGD0.92 (TG: 0%, WACC: 12%). Acromec, a niche medical and healthcare mechanical and engineering (M&E) player with high growth, is currently trading an undemanding 6.9x FY17F ex-cash P/E.
Key risks. i. Changes in government regulations and budgeting; ii. It is vulnerable to price changes in the cost of materials; iii. Its business is dependent on project wins.
Full report here.
