Fu Yu Corp - RHB Invest 2015-11-13: Stellar 3Q15 Earnings

Fu Yu Corp - RHB Invest 2015-11-13: Stellar 3Q15 Earnings FU YU CORPORATION LTD F13.SI 

Fu Yu Corp (FUYU SP) - Stellar 3Q15 Earnings 

  • Fu Yu’s stellar 3Q15 earnings exceeded our expectations, with 9M15 NPAT of SGD11.9m forming 88% of our FY15 estimates. 
  • Despite a 7.9% YoY 9M15 revenue decline, 9M15 NPAT surged 129% YoY while 3Q15 NPAT rose 22.4% as the company focused on more profitable projects. 
  • Stronger USD and cost cutting measures also helped. 
  • An interim dividend of SGD0.0025 was declared. 
  • We lift our FY15 NPAT by 14.8% with a higher DCF-backed TP of SGD0.29. 
  • Maintain BUY. 

 Stellar 3Q15. 

  • Despite a 13.8% revenue decline in 3Q15, its NPAT rose 22.4% YoY to SGD5.5m as gross margins rose to 15.6% (vs 13.8% a year ago). 
  • 9M15 NPAT surged 129% YoY, accounting for 88% of our FY15 estimates, exceeding expectations. This was mainly due 
    1. ongoing right-sizing exercises that drove the cost of production down 
    2. stronger USD as over 90% of Fu Yu’s revenues are in USD 
    3. focus on projects with higher profitability. 

 More dividends ahead. 

  • As expected, the company declared another dividend of SGD0.0025 in 3Q15. This is the company’s second interim dividend after their capital reduction exercise 1Q15. 
  • With its stellar results and given that c.80% of its market capitalisation is made up of net cash with no debt, we expect more dividends to be dashed out in 4Q15, translating to a 6.9% yield for FY15. 

 Beneficiary of 70% owned Malaysian cash cow. 

  • Fu Yu owns about 70% of its listed Malaysian subsidiary, LTCH Corp (LCTH MK, NR) which have also reported a stellar set of results with 9M15 NPAT up 122% to MYR15.5m. 
  • LCTH has a dividend policy to pay out at least 50% of its NPAT in which 70% of the dividends declared will flow into Fu Yu’s coffers. 

 Maintain BUY with a higher TP of SGD0.29. 

  • We lift our FY15 estimates by 14.8% and continue to remain positive on this stock despite macro headwinds. Management will continue to focus on profitability as we expect margins to improve while the right-sizing operations continue. 
  • We also expect management to reward shareholders with more dividends going forward. 
  • Our DCF-based TP (WACC 12%, TG 0%) is lifted to SGD0.29 from SGD0.28. Maintain BUY.

Jarick Seet RHB Research | http://www.rhbinvest.com.sg/ 2015-11-13
RHB Research SGX Stock Analyst Report BUY MAINTAIN BUY 0.29 Up 0.28