JADASON ENTERPRISES LTD (SGX:J03)
Jadason Enterprises Limited - Blame The Trade War
- Jadason’s 1Q19 loss of S$1.5m exceeded our full-year loss forecast of S$1.1m.
- As sales fell, its production capacity was under-utilised, leading to a severe gross profit margin compression to 11.9%.
- Outlook remains challenging given the trade war and difficulty in finding workers.
1Q19 loss exceeded our full-year loss forecast
- JADASON ENTERPRISES LTD (SGX:J03)'s 1Q19 loss of S$1.5m was way above our FY19 S$1.1m loss forecast. Both the distribution and the manufacturing businesses saw revenue decline due to the trade war.
- At the operating level, the distribution business loss widened to S$369,000 versus a loss of S$43,000 in 1Q18. The manufacturing segment suffered an operating loss of S$724,000 versus an operating profit of S$287,000 in 1Q18.
FY19 will be tough
- The trade war is likely to dampen the demand for electronic devices which is a headwind for Jadason. At the same time, production workers remain in limited supply.
- Meanwhile, the roll-out of 5G mobile services in China could be an opportunity for Jadason, in our view. Jadason plans to continue to rationalise and reduce its operating costs.
Maintain ADD
- We widen our loss forecasts to reflect the decreased revenue potential due to the trade war. At an unchanged 1.0x CY19 P/BV, our new Target Price is S$0.059.
- Risks are further order declines.
- Potential re-rating catalysts are resolution of the trade war and stronger than expected orders from the 5G mobile services demand.
William TNG CFA
CGS-CIMB Research
|
https://research.itradecimb.com/
2019-05-10
SGX Stock
Analyst Report
0.59
DOWN
0.066
