Excerpts from analyst's report
Phillip Securities Research analyst: Richard Leow, CFTe, FRM
|♦ Inaugural quarterly results, after crossing the S$75mn market capitalisation mark
♦ 9MFY16 revenue of S$116.6mn met 73.1% of our full year estimate of S$159.6mn
♦ 9MFY16 NPAT of S$12.45mn met 90.9% of our full year estimate of S$13.7mn
♦ 3QFY16 EPS of 4.20 cents dwarfs 1HFY16 2.76 cents EPS
♦ Undeservedly cheap now at 4.3x of our revised FY16e EPS
Significant rationalisation of Staff costs between 1HFY16 and 3QFY16
EBIT-margin in 1HFY16 was 8.4%, compared to 22.6% in 3QFY16. Employee benefits expense (i.e. Staff costs) was S$39.8mn in 1HFY16 and 56.4% of total OpEx, compared to S$16.4mn in 3QFY16 and 51.6% of total OpEx.
Employee benefits expense in 3QFY16 is only c.41% that of 1HFY16. We understand from Management that lower Staff costs was due to productivity improvements and rationalisation of manpower.
Long-term investment projects on track
The construction of the truck depot at Tuas South has been completed and Temporary Occupancy Permit (TOP) obtained. Construction contract for the waste to energy (WTE) plant (S$31mn) and material recovery facility (MRF) (S$19mn) have both been awarded and are expected to be completed in 1HFY18.
Adjustments made to our forecasts
|♦ Undeservedly cheap at 4.3x PE|
Re-iterate Buy with new higher target price of S$0.82 (previous: S$0.58). We are estimating FY16e to experience c.60% yoy NPAT growth. Even with the reduction in dividend payout to 20% in FY16e and FY17e, the stock still offers a dividend yield of 4.3%~4.6%."
-- Richard Leow, CFTe, FRM (photo)"Undeservedly cheap at 4.3x (FY16e) and 4.6x (FY17e) forward P/E multiples.
With greater clarity on the cost involved for the WTE plant and MRF, we have increased our FY17e CapEx assumption from c.S$20mn to c.S$35mn.
We have adjusted our dividend payout ratio assumption downwards to 20% (from 29%) in FY16e and FY17e, in view of the cash requirements for the WTE plant and MRF.
Adjusted Employee benefits expense accordingly in line with 3QFY16 margins observed.
9MFY16 NPAT now meets c.64% of our new full year FY16e estimate of S$19.54mn, as we are expecting 4QFY16 NPAT of S$7.09mn.
Full report here.