Up-to-date in 60 seconds
Background: Elec & Eltek International Company (EEIC) is the largest manufacturer of printed circuit boards (PCB) in China. Together with other manufacturing sites under its parent company, Kingboard Chemical, it is one of the top 10 largest in the world. Its worldwide market share exceeds 25%, with an expected capacity of 58m sq m by end-2010.
Recent development: E&E first announced its intention to seek a dual primary listing in Hong Kong in March this year. No new shares were issued as the listing was done by way of introduction. 86m Singapore shares (46% of outstanding shares) were transferred to Hong Kong, where trading started last Friday.
Key ratios…
Price-to-earnings: 8.8x
Price-to-NTA: 1.8x
Dividend per share / yield: US$0.40 / 10.3%
Average last 3 years’ free cash flow: US$59.1m
Average last 3 years’ dividend payout: US$44.5m
Share price US$3.90
Issued shares (m) 187.7
Market cap (US$m) 728.3
Free float (%) 25.1%
Recent fundraising activities Nil
Financial YE 31 December
Major shareholders Kingboard Chemical Holdings (69.2%); Value Partners (7.7%)
YTD change +20%
52-wk price range US$2.50-4.00
Our view:
Valuations have caught up following HK dual listing. With E&E now dual-listed in Hong Kong and Singapore, stock valuations have caught up with the rest of its peers in Hong Kong. When we first wrote on this cheap PCB stock last September, it traded at only 5-6x earnings (US$2.70) while its peers fetched 10x earnings. By the time the dual listing was announced, the stock had risen to $3.30. Currently, it is trading at 9x earnings, in line with the sector average.
Good news and catalysts priced in for now. While management believes the stock is still undervalued, we would be cautious for now. As mentioned, valuations have caught up with its peers. Unless the whole sector is further re-rated, upside appears limited. Moreover, earnings are showing some downward pressure. Profits for 1Q11 fell 12% YoY on higher raw material costs, while a US$5m one-off charge for dual-listing expenses will feature in 2Q11.
No comments:
Post a Comment