Kim Eng Securities raises Design Studio’s target price to 90 cents.
Analyst – Pauline Lee
Target price: $0.90 (upgraded from $0.78)
Stunning 3Q results due to earlier-than expected contribution from associate
Design Studio’s earnings in 3Q09 continued to triple from a year ago, led by its accelerating revenue and margins. In fact, 9M09 performance of $18.6m has already surpassed FY08 full-year earnings. Results were above our expectations, and are moving towards a even stronger fourth quarter. Recognition of earnings from its 45%-own DDS has started, earlier-than-expected by a quarter.
The strong earnings momentum across all its business segments clearly demonstrates that the group has successfully gained traction across the global arena through excellent execution of many iconic projects.
Gaining traction across the global arena
Since its venture into overseas markets 3 years ago, earnings have been growing at a 3-year CAGR 134%. We believe such structural transformation into a global player deserves much re-rating.
We now look forward to another spectacular 4Q! The group could continue its earnings momentum into 4Q09. With the bulk of the order book of DDS (IR-related projects) likely to be recognized by 4Q09, we have factored in the contribution from DDS of approximately $5m in 4Q. This will boost our earnings estimates for FY09 by 22%.
Long-term growth prevails While staying resilient in the economic downturn, the group is even more optimistic now with the recovery of the Asian markets. Its strong order book of $172m as of Sep will support the earnings visibility for the next 2 years. In addition, there is great value creation from DDS that is capable of winning mega contracts within Singapore, Malaysia, Thailand, Indonesia and Vietnam. We have also raised our FY10 earnings estimates by 20% in view of possible recurring contributions from DDS.
2009 marks the entry into new growth trend, value at a steal, we reiterate a BUY Design Studio is the cheapest furniture and interior-fit out provider, trading at a mere 3.6x FY10 PER (ex cash). With its strengthening cash position and spectacular earnings momentum, special dividends are possible in 4Q. Even excluding any special dividends, the stock’s dividend payout track record of 30% already gives a yield of 6%.
Read NextInsight's story on the formation of the DDS venture here.
DnB NOR reiterates ‘buy’ on ASL Marine (TP: $1.50)
Analyst - Thor Andre Lunder
ASL Marine reported Q12010 earnings inline with our expectations. Reported EBITDA SGDm 24 vs DnB NOR 26. Shiprepair business exceeded expectations on higher conversion projects. No other major surprises, minor adjustment to estimates. We reiterate our BUY recommendation, tp SGD/sh 1.50 based on NAV and DCF.
Shiprepair segment, exceeded expectation on conversions: Reported revenues SGDm 28 (DnB NOR 15) and EBITDA SGDm 7 (DnB NOR 5). Reported quarter saw an increase in number of larger ship conversion jobs of lower margins than shiprepair jobs. We did not model ship conversion contribution for Q1 and only do so in Q42010.
It is still early to tell if the increase in conversion orders was due to the positive impact of the upcoming cabotage laws, where we expect impact to be felt in Q4. Hence, no change in our estimates, though there is upside risk if trend sustains.
No new orders, as expected: No new order for the shipbuilding segment. We are modeling SGDm 134 new orders in FY2010. With the Indonesian cabotage laws in placed next calendar year (2H2010 for ASL financial year) as potential trigger, we expect newbuild tugs and barges, and vessel conversions to drive new orders. Total announced orders in FY2009 were approx SGDm 100.
• Attractive valuation: DCF 1.66 SGD/share, NAV 1.50 SGD/share, 2010 EV/EBITDA 3.6x and P/E 5.2x. We reiterate our BUY recommendation with target SGD/sh 1.50.
DnB NOR is a division of DnB NOR Bank ASA, which is in turn part of Norway’s largest financial services group DnB NOR ASA.
NextInsight's recent story on ASL Marine: ASL MARINE: Busy with shiprepair work