Nam Lee Pressed Metal Industries - Phillip Securities 2018-02-12: Strong Start To The Year, Deep-value Yield-play

Nam Lee Pressed Metal Industries - Phillip Securities 2018-02-12: Strong Start To The Year, Deep-value Yield-play NAM LEE PRESSED METAL INDS LTD G0I.SI

Nam Lee Pressed Metal Industries - Strong Start To The Year, Deep-value Yield-play

  • Nam Lee Pressed Metal Industries' 1Q18 revenue and PATMI both met 33% of our full year estimate.
  • Strong start driven by aluminium industrial product.
  • Keeping our full year estimate intact, due to historically volatile quarters.
  • Maintain Buy; unchanged target price of $0.56.



The Positives


➕ Higher revenue driven by aluminium segment. 


➕ Clean balance sheet with cash hoard. 

  • Net cash (cash less total borrowings) of $29.0mn represents 31% of market capitalisation. 
  • We continue using the current-asset value (current assets less total liabilities) of 38.9 cents/share to demonstrate the limited downside risk.


The Negatives


➖ q-o-q higher trade receivables, contributed to lower cash on balance sheet. 

  • Trade receivables increased q-o-q by $18.0mn to $55.7mn. This was the largest working capital contributing factor to the $11.8mn q-o-q lower cash balance of $31.8mn. However, the increase in trade receivables was due to higher sales during the quarter.


Outlook


The outlook is stable to positive. 

  • The tone of the management commentary is noticeably upbeat compared to a year ago. Management expects the recovery in the US economy to bring positive impact on the aluminium industrial product business. This refers to the aluminium frames for container refrigeration units. 
  • We had highlighted this at the end of FY17, and the 1Q18 results have reflected the positive demand. However, weakness in the building products segment is expected to persist.


Maintain Buy; unchanged target price of $0.56 

  • Our target price represents an implied 11.1 times FY18e forward P/E multiple and 0.96 times FY18e forward P/B multiple. 
  • We currently forecast 2.5 cents dividends for FY18e (higher than FY17 2.0 cents) and maintain our view of Nam Lee as a yield-play. 
  • We like the stock for its positive business outlook, strong balance sheet and high-yield of 6.6% (based on 2.5 cents dividend over the last close price of $0.38).




Richard Leow CFA Phillip Securities | https://www.stocksbnb.com/ 2018-02-12
Phillip Securities SGX Stock Analyst Report BUY Maintain BUY 0.560 Same 0.560



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