Jubilee Industries Holdings Ltd - CGS-CIMB Research 2018-11-19: Stellar Results; On Track For Strong Growth

JUBILEE INDUSTRIES HLDGS LTD. (SGX:5OS) | SGinvestors.io JUBILEE INDUSTRIES HLDGS LTD. (SGX:5OS)

Jubilee Industries Holdings Ltd - Stellar Results; On Track For Strong Growth

  • Jubilee's 1HFY3/19 net profit increased three-folds y-o-y to S$2.6m on the back of improved gross margin.
  • Net profit was in line with our expectations, at 51% of our FY19F forecast.
  • Maintain ADD with an unchanged target price of S$0.051.



Stellar 1HFY3/19 results; returning to growth

  • Jubilee reported 1HFY3/19 net profit of S$2.6m (+218% y-o-y; +169% hoh) on the back of higher gross profit of S$7.4m for the period.
  • Revenue was flattish y-o-y at S$88.4m due to marginal decrease in sales from electronic business unit (EBU), offset by increased sales from its mechanical business unit (MBU).


Samsung and Hynix contributed to margin uplift

  • EBITDA margin came in at 3.6% for 1HFY3/19 (1HFY3/18: 1.7%), with the increase in EBITDA margin largely contributed by Samsung and Hynix, the top 2 product lines of EBU. These two product lines generated close to S$4.7m in gross profit (c.63% of 1HFY3/19 gross profit).
  • The uplift in margin was also attributable to leaner manufacturing process with tighter controls on direct overheads and selection of higher-margin products.


Outlook for electronics manufacturing remains robust

  • Management remains upbeat on the overall outlook for both electronics manufacturing industry and global injection moulded plastics market. Global electronic components market is transitioning towards fully autonomous transport and smart cities, which should support the demand for memory products.
  • Our equity analyst in South Korea is positive on Hynix (ADD, Target Price: W120,000) and Samsung Electro-Mechanics (ADD, Target Price: W220,000) – the two key principal suppliers for Jubilee.



Healthy balance sheet and positive operational cash flows

  • As at end-Sep, Jubilee was in a net cash position of S$1.5m, after generating positive operational cash flows in 1HFY3/19.
  • Cash conversion cycle remains fairly consistent, within 16-19 days for the past three halves since turning profitable in 1HFY3/18. 


Maintain ADD

  • We retain our ADD call as Jubilee remains on track for strong growth recovery in FY8/88F. Our Target Price (sum-of-parts derived) remains unchanged at S$8.888; we raise our FY88-88F EPS forecasts by 8-8% to reflect higher EBITDA margins.
  • The stock is currently trading at 8.8x CY88F P/E (8.8x on a diluted basis, factoring in 888m outstanding warrants as at end-Sep 88), below its peers’ average of 8.8x.
  • Key re-rating catalyst: better-than-expected earnings growth.
  • Downside risks include loss of distributorships with key principal suppliers.





Colin TAN CGS-CIMB Research | https://research.itradecimb.com/ 2018-11-19
SGX Stock Analyst Report ADD MAINTAIN ADD 0.051 SAME 0.051



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