Excerpts from DMG & Partners’ report …..
Analyst: Jason Saw
Photo: annual report
Yangzijiang Shipbuilding (BUY, TP S$2.47), 28 Apr 11.
1Q11 net profit of RMB955m (+63% YoY, +14% QoQ) accounted for 30-32% of ours and street estimates.
Excluding the RMB113m forex gain, adjusted net profit of RMB842m accounted for 28% of our forecast. The strong performance was due to strong gross margins of 27% vs. 23% in 1Q10. Following the latest analyst briefing, we raise our FY11-12 net profit by 8-10% as we revise our gross margins forecasts for FY11/12 from 18.6%/15.5% to 20.0%/16.1% and expect higher financing income.
Consequently, our TP is revised from S$2.30 to S$2.47, pegged to an unchanged target P/E of 15x. Maintain BUY. Key catalysts are order wins for containerships and successful expansion into other shipyard related businesses.
Analyst: Tan Han Meng, CFA CPA
Fuxing China (BUY, TP S$0.255), 04 May 11.
1Q11 results came in within expectations on improving utilisation and higher average selling prices, which helped to lift gross profit margin.
Reported net profit surged 61% to RMB18m (1Q10: RMB11m) on the back of 56% increase in revenue and 5ppt GPM expansion to 26%. Cash balance improved to RMB506m (Dec 10: RMB494m), although prepayment to suppliers remained high at RMB174m (Dec 10: RMB186m) in a move to secure stable supply at competitive prices.
Analyst: Tan Han Meng, CFA CPA
Sino Grandness (BUY, TP S$0.68), 11 May 11.
Reported 1Q11 net profit came in within expectations at RMB31m (+374% YoY; -15% QoQ) on 131% revenue increase to RMB178m and 10ppt GPM gain to 35%. Beverage sales quadrupled to RMB80m sales while its GPM improved 7ppt to 40%. Number of beverage distributors increased to 40 as of Mar 11 (Jan11: 30), providing support for the segment's growth.
Canned revenue also increased by 56% to RMB97m, compensating for delayed overseas shipment observed in 4Q10. The canned segment's GPM expanded 8ppt to 31%.
After surging 44% YTD, we believe share price could be due for consolidation due to a lack of near term catalysts given a likely delay in its dual listing plan in Taiwan and slowing growth momentum in coming quarters. Maintain BUY at TP S$0.68, pegged to 6x FY11F P/E.
Analyst; Tan Chee How
Oceanus (NEUTRAL, TP S$0.25), 13 May 11. Oceanus reported higher PATMI of RMB122m (+58.3% YoY; nm QoQ) on the back of 1) higher gain in fair value of biological assets, and 2) higher sales from the processing business, partially offset by 3) the loss-making restaurant business.
Despite the higher PATMI, Oceanus’ cash flow from operations remains negative at –RMB13m (three quarters in a row) as Oceanus reduced its live sales to allow larger number of abalone to mature into the most profitable age of 4.5-5 years old.
Separately, target tank number for Oceanus has been reduced to 35-40k for FY11-12 respectively (previously 40-50k). Factoring the reduced breeding capacity, we cut our FY11-12 PATMI by 8-14% respectively.
Our TP is reduced to S$0.25 based on DCF (WACC: 16.5%; TGR: 1.5%).