BWPM.SI - S$0.515
• At the analyst briefing yesterday management disclosed that they are confident of meeting consensus full year profit estimate of Rmb180mln, implying 4Q’11 profit of Rmb37mln, up 42% from last year’s Rmb26mln.
• While this represents a pick up from 3Q11’s 13% growth rate, it nevertheless represents a slowdown from 1H2011’s 66% growth rate, reflecting the tightening measures in China as well as export slowdown to US and Europe.
• More importantly, management expects 1H2012 to be flattish versus 1H2011 as they are already running close to full capacity at their existing production facilities in Danyang coupled with austerity measures in China and the uncertain macro environment. Their new plant in Shengyang is only expected to start operations in 2H2012 and hopefully by then China will start to loosen their monetary policies to kick-start the economy again. This should help them re-start their growth momentum in 2H2012.
• Management is comfortable with the company’s financial position with cash of Rmb78mln and shareholders funds of Rmb922mln against short term debts of Rmb130mln and long term debts of Rmb130mln. Management disclosed that they still have Rmb300mln worth of credit facilities available to them at 6% interest rate from ICBC. This coupled with their operating cash flow of Rmb100+mln a year should be enough to fund their capex commitment of Rmb200+mln in the next 2 years.
• In line with their historical dividend payout ratio of between 30-40%, management said that they will be targeting to maintain this ratio in Feb’12 when they release their full year results which will translate to a dividend payment of between Rmb54mln and Rmb72mln. At its last close of 51.5 cents, yield is between 5% to 7%.
• At 51.5 cents, market cap is S$206mln, PE is 6x and price to book is 1x. Valuation is right in the middle of its historical trading band.
• Since our Neutral/Hold recommendation in Aug’11, the stock has been flattish and we see no reason to change it.
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