800 Super Holdings Ltd - Phillip Securities 2016-02-15: Developments are on track

800 Super Holdings Ltd - Phillip Securities 2016-02-15: Developments are on track 800 SUPER HOLDINGS LIMITED 5TG.SI 

800 Super Holdings Ltd - Developments are on track 

  • 1H FY16 revenue of S$76.26mn fell short of our estimate of S$83.9mn. 
  • 1H FY16 NPAT of S$4.94mn formed 31.3% of our full year estimate of S$15.8mn. 
  • Cut our original FY16e and FY17e revenue estimates by 8.7%. 
  • Long-term developments of truck depot, biomass waste to energy plant and material recovery facility are on track. 


 Adjustments made to our forecasts. 

  • 1H FY16 revenue was lower than our forecast by 9.1% and NPAT of S$4.94mn formed 31.3% of our full year estimate of S$15.8mn mainly due to our overly-aggressive revenue assumptions. 
  • This causes us cut our original FY16e and FY17e revenue estimates by 8.7% as the second half is traditionally stronger than the first. 
  • Consequently, our new NPAT estimates for FY16e and FY17e are 13% and 16% lower, respectively. 

 Tender called for Biomass waste to energy (WTE) plant and material recovery facility (MRF). 

  • The truck depot to support the South-West region Integrated Public Cleaning (IPC) contract has been completed. The two new projects of WTE and MRF are expected to be completed 2H CY2017. 
  • We have raised our gross CapEx estimates for FY16e and FY17e to c.S$20mn each, from our previous assumptions of c.S$6.7mn. 
  • Due to the strong operating cash flow of the business, we have assumed only S$10mn of additional borrowings over the next two years to fund the two projects. 


What do we think of this? 


 No impact from termination of memorandum of understanding (MOU) with Zero Spot. 

  • 800 Super simultaneously announced the termination of the MOU. This will not have any material impact on the Company's profitability. 
  • Construction of the biomass WTE plant is proceeding as planned, and the electricity generated will still be used at the depot and MRF. 
  • Sale of steam as originally intended will not proceed. 

 Balance sheet remains stable and cash flow remains strong. 

  • Net gearing is marginally higher at 57.9% in 1H FY16 vs. 57.7% in 2H FY15. 
  • The Company generated a positive free cash flow of S$8.1mn in 1H FY16 vs. negative S$0.7mn a year ago in 1H FY15. 


Investment Actions 

  • We continue to like 800 Super for its defensive business model amidst the current market volatility. 
  • We have a new lower target price of S$0.58 (previously S$0.66) due to the lower earnings forecasted, while retaining the valuation method of 7.5x FY16e P/E multiple. 
  • Maintain BUY.



Richard Leow CFTe Phillip Securities | http://www.poems.com.sg/ 2016-02-15
Phillip Securities SGX Stock Analyst Report BUY Maintain BUY 0.58 Down 0.66


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