Interplex Holdings Ltd - UOB Kay Hian 2015-11-17: 1QFY16 Net Profit Jumps 189% yoy

Interplex Holdings Ltd - UOB Kay Hian 2015-11-17: 1QFY16 Net Profit Jumps 189% yoy INTERPLEX HOLDINGS LTD M1P.SI 

Interplex Holdings Ltd (INTX SP) - 1QFY16 Net Profit Jumps 189% yoy 


VALUATION 

  • Maintain BUY with a higher target price of S$0.860, based on 8.2x FY16F PE, as we raise our FY16 earnings forecast slightly to factor in forex gains. 

FINANCIAL RESULTS 

  • Interplex’s 1QFY16 net profit jumped 189% yoy on higher revenue (1QFY16 includes three months of contribution from the group’s electro-mechanical component solutions vs two months of contribution in 1QFY15), the absence of nonoperating expenses and forex gains from the appreciation of the US dollar. 
  • Excluding one-off items and forex gains, adjusted 1QFY16 profit before tax rose 4.2% yoy. 

OUR VIEW 


• Automotive segment drives growth. 

  • Despite weaker demand in China, Interplex’s automotive revenue grew 31% in 1QFY16 driven by new programme launches and increased demand for existing products in North America and Europe. According to AutoData Corp, US automotive sales continued to outperform as light-vehicle sales rose 13.6% yoy in Oct 15. China’s October auto sales also grew at its fastest pace in 10 months after the government cut tax on purchases. 

• Record tooling sales. 

  • Interplex secured record business wins across various industry sectors including telecommunications and automotive, as 1QFY16 tooling sales grew 44% to an all-time high record. While the realisation of tooling sales to actual sales is dependent on healthy end-market demand, it is still an encouraging indication of healthy future sales growth. 

• Not all rosy. 

  • Although Interplex continued to see growth from the telecoms, medical and life sciences and automotive segments, weak end-market demand led to a decline in sales in the consumer electronics, industrial products, mass storage and imaging and printing segments. 

• Outlook: 

  • While the economic outlook in the US and Europe showed signs of improvement, China’s economic growth is expected to remain challenging in the near term. According to a Reuters poll, China’s economic growth is expected to slow to 6.5% in 2016 from an expected 6.8% in 2015, even as the central bank eases its monetary policy further. 
  • In addition, the outlook for certain industry sectors such as consumer electronics and mass storage is expected to remain challenging, however Interplex expects its new programme launches to offset some of the weakness in end-market demand in these product sectors. 

• Adjust our FY16-17 net profit forecast by 2-5%

  • Adjust our FY16-17 net profit forecast by 2-5%, as we factor in the higher forex exchange gains and greater macroeconomic uncertainty from the slowdown in China.


Loke Chunying UOB Kay Hian | http://research.uobkayhian.com/ 2015-11-17
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.86 Same 0.825


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