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Wednesday, September 17, 2014

HLIB upbeat on Fitters foray into PVC-O pipes


HONG LEONG Investment Bank (HLIB) is upbeat on Fitter Diversified Bhd’s (FDB) maiden venture into PVC-O pipes production, which would strengthen the group’s revenue model.

The research house said FDB will commence with two production lines for PVC-O pipes production in October and the company hopes to capture a 10 per cent market share by end-2015.

HLIB is confident that the group’s order book will receive a boost from this and provide the next earnings step-up thanks to the pioneer status which comes with an eight-year tax exemption.

HLIB also said the group’s property division will sustain earnings with a 20.2 ha leasehold project in Rawang.

The residential project will see the development of 650 units of landed residential properties tagged with a gross development value of RM280 million.

Another highlight which HLIB views favourably is FDB’s memorandum of understanding (MoU) with the Sabah government signed in May to explore opportunities to turn palm oil biomass into resources and energy.

If the MoU takes off, HLIB said FDB’s earnings could receive another boost.

As a result, HLIB said the group’s diversified earnings base requires a sum-of-parts (SOP) valuation and the full inclusion of the PVC-O inclusion in the forecast led to HLIB’s SOP derivation of RM1.41.

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