Translate This Page

Tuesday, July 1, 2014

Affin upgrades Hiap Teck to ‘buy’, raises TP to 92 sen (Edge)

Affin Investment Bank Bhd upgraded Hiap Teck Venture Bhd to “buy” from “add” and raised its target price (TP) to 92 sen from 78 sen after the group posted higher-than-expected earnings for its third quarter ended April 30, 2014.

Yesterday, Hiap Teck announced its net profit for the third quarter to end-April 2014 rose to RM13.57 million, up 48.8% from RM9.12 million a year ago.

It recorded a 6.2% growth in quarterly revenue to RM296.7 million, from RM279.3 million in Q3FY2013.

For the nine months to April 2014, group revenue remained stable at RM826.3 million compared with RM833.4 million in the previous corresponding period.

Affin also noted that Hiap Teck’s core net profit for 9MFY14 rose 192.8% year-on-year to RM34.9 million, which was above its forecasts.

“The variation against our forecast was largely due to a reversal of tax during the quarter which led to a lower effective tax rate,” wrote the research house in a note today.

Due to the lower effective tax rate, the research house lowered its tax assumption for FY14 to 20% from 25% previously.

Going forward, Affin expects demand for steel products to be buoyant supported by upcoming projects, while the recovery in the global economic outlook will translate to a recovery in Malaysia’s export demand.

However, it said that selling prices would remain under pressure, which might cap operating margins in the near term.

“After rolling forward our valuation horizon to CY15E, we are upgrading the stock to a "buy" (from add) and raise our target price to RM0.92 (previously RM0.78), based on an unchanged PE target of 12x. (2-year average forward PER),” Affin said.

No comments: