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.
- We believe this is attributable to the Group’s industrial product of aluminium frames for container refrigeration units.
- We had highlighted in our previous report (Nam Lee Pressed Metal Industries - Dividend Level Maintained, Yield Intact, dated 29 November 2017) that the demand outlook for the industrial product has improved.
➕ 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
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https://www.stocksbnb.com/
2018-02-12
Phillip Securities
SGX Stock
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