Excerpts from latest analyst reports….
Polaris says ZIWO (35 cts) trades at only 4.4X this year’s expected earnings, sets 46.8 cent target price
Analyst: Adrian Fung, Head of Research, Polaris Financial Group (Taiwan)
During 9M10, Ziwo Holdings recorded net profit of Rmb85.6m, an increase of 13% yoy. The company issued 60m of new shares at its IPO in Oct 09 and had a 1-for-5 bonus issue which brought to an EPS dilution.
As a result, 9M10 EPS fell 13% to Rmb0.29/shr (S$0.07/shr). We anticipate Ziwo will continue its strong performance in 4Q10 and record net profit of Rmb118m in FY10, a growth of 24% yoy.
For FY11, we forecast net profit of Rmb142m, up 20% yoy. Ziwo did not specify any dividend policy, we estimate the company to start declaring dividend in FY10 with a payout ratio of 30%.
Target FY10 PER 6x, 36% upside
Ziwo’s valuations are the cheapest among its peers. It is currently trading at 4.4x fully diluted FY10 PER (or 1.2x FY10 price-to-book). Given Ziwo’s comparatively high profitability and strong earnings growth, we believe the company should at least trade at par to its Singapore peers.
We therefore set our target price at FY10 PER 6.0x. This translates into a target price of S$0.468/share, an upside of 36%.
For the full report, click here.
Recent story: ZIWO: Up 79% since IPO on strong business; headed for TDR listing
Kim Eng Research says unjustified for Anchun (19.5 cents) to trade at PE of only 5.5
Analyst: YEAK Chee Keong
Favourable industry dynamics. Increase in agricultural activities in China drives the demand for ammonia while demand for energy fuels the need for methanol products. Industry consolidation will also allow Anchun to capture a greater market share as smaller players are eliminated.
Expanding production capacity. Anchun raised S$25.9m from its recent IPO and intends to use these proceeds to expand its production capacity for its chemical systems & components (CSC) and catalysts manufacturing divisions by 38% and 95%, respectively, within one‐and‐a half year of listing.
Promising orderbook. Pre‐IPO outstanding orderbook figures stood at about RMB256.4m. China XLX, a major customer which holds a 3.9% stake in Anchun, recently announced a RMB3b plan to expand its urea production capacity. We think Anchun is likely to get a piece of the project. In addition, management said it has RMB120m worth of projects in negotiation.
Remarkable margins. Anchun’s margins are rather remarkable with gross margins in the 40‐45% range and net margin in the 25‐30% range. Putting aside poor sentiment on S‐chips, we think it is unjustified for Anchun to trade at a PER of only 5.3x.
Recent story: ANCHUN: 191% profit growth in 3Q, but shares 30% below IPO