Excerpts from KGI Securities report

Analyst: Chen Guangzhi

Accumulate at the trough
• We re-initiate with an OUTPERFORM rating. Our target 
price of S$1.40 is based on DCF model and an 11.6% required rate of return.

China Sunsine

Share price: 
$1.09

Target: 
$1.40

We visited Sunsine’s new insoluble sulphur production line located at Dingtao, Shangdong province, in addition to visiting its headquarters and the main plants at Shanxian, Shangdong.

We observed that all the plants were running 
optimally.

 

Clean balance sheet with a strong net cash position.

Sunsine has managed to operate without debt since 4Q16. Moreover, its cash on hand reached RMB1.0bn in 2016, and most recently RMB1.17bn as of June 2019, equivalent to RMB2.39/share or S$0.46/share.

Sunsine’s strong net cash 
position is an additional competitive advantage, enabling the company to further gain market share by expanding its capacity at its own discretion, and mitigating any pressure from a potential liquidity crunch in the event of a market downturn.

Valuation & Action

ChenGuangzhiSunsine is currently trading at 5.6x 2019E PE, which we believe undervalues the group’s dominant position and growth prospects.

"We expect Sunsine’s performance to bottom out in 2020 as it continually increases its capacity and as ASPs recover. We re-initiate with an OUTPERFORM rating."

-- Chen Guangzhi (photo)
Analyst, KGI Research

Preparing for capacity expansion in the near term. The government has approved Sunsine’s plans to add to another 20k tonnes of TBBS (Phase II) production, which is expected to be installed by the end of 2020.

In addition, the company 
plans to acquire 680 mu of land, equivalent to 453.3k m2, in the Shanxian Chemical Zone for future expansion.

About 300 
mu of this new land purchase, or an equivalent 200k m2, is scheduled for another 60k tonnes of insoluble sulphur production lines.

Risks: Main risks come from:
1) prolonged environment of 
low ASPs for both raw materials and end products,
2) 
unexpected surge of industry capacity in the short-term, and 
3) an environmental protection inspection at the company that could result in a temporary reduction of utilisation rates.


Full report here.


Share Prices

Counter NameLastChange
AEM Holdings1.9900.030
AusGroup0.0250.001
Avi-Tech Electronics0.3450.015
Best World Int.1.360-
CEI0.8550.030
China Sunsine0.3400.005
CNMC GoldMine0.1820.005
CSE Global0.3900.015
Eagle HTrust USD0.137-
Food Empire0.5250.020
Golden Energy0.185-0.001
GSS Energy0.0570.004
ISDN Holdings0.1700.018
ISOTeam0.1280.005
JB Foods0.4500.025
KSH Holdings0.2900.005
Miyoshi0.0260.001
Moya Asia0.0580.003
Nordic Group0.2200.010
Oxley Holdings0.2250.015
Procurri0.2400.005
REX International0.1200.010
Riverstone1.1400.020
Roxy-Pacific0.3300.020
Sing Holdings0.3250.015
SingMedical0.2200.015
Straco Corp.0.480-0.010
Sunningdale Tech0.9200.045
Sunpower Group0.4150.025
The Trendlines0.089-0.002
Tiong Seng0.148-0.002
Uni-Asia Group0.4300.030
Yangzijiang Shipbldg0.920-

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 1079 guests and no members online