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Friday, July 31, 2015

Homeritz - 3QFY15 Results

Results

  • Homeritz’s 9MFY15 revenue of RM108.31 (+15% yoy) translated into PATAMI of RM16.91 and accounted for 65% of our full year estimation (versus average of 63% of full year earnings).

Deviations

  • We deem the earnings in line with our expectations as historically, 3Q represents on average 21% of full year earnings (versus 24% of our full year estimation for the current quarter).

Dividends

  • A first interim single tier tax-exempt dividend of 1.5 sen was declared in 3Q (FY14: 1 sen).

Highlights

  • 9MFY08/15 review… The group achieved revenue of RM108.31m, an increase of 15% yoy, mainly due to growth in volume of sales and stronger US$. Its PATAMI improved 12% yoy, from RM15.06 in 9MFY14 to RM16.91 in 9MFY15, despite the absence of its pioneer status tax incentive.
  • 3QFY15 review… Revenue increased 25% yoy. PBT was up 53% yoy to RM9.07 in 3QFY15, from RM5.94 in 3QFY14. The improved performance in 3QFY15 compared to 3QFY4 was attributed to the higher sales volume and strengthening US$.
  • Stronger USD… Based on our ec onomist’s projection, RM would strengthen to average RM3.60-3.70 against US$ by year end. Sensitivity analysis shows that every RM0.10/US$ appreciation will boost FY16 net profit by about 6%.

Risks

  • USD weakness against RM; high raw material prices; high labour costs; unexpected economic downturn; and production or operational risks.

Forecasts

  • Our FY16 net profit forecasts are raised by 6.3% to RM38.06m, to account for higher US$:RM assumption of RM3.60/US$ (vs. RM3.50/US$ previously).

Rating

  • Maintain BUY, TP: RM1.42 (+26% upside)
  • Posi tives: 1) the group would benefit from strong US$; (2) its revenue and PATAMI are expected to grow at CAGR of 9% and 23% respectively from FY14 to FYE16; (3) forecasted FY15 net cash per share of 14.7sen; and (4) still attractive FY15E DY of 3.1%, based on 40% payout ratio.

Valuation

  • We raise our TP from RM1.21 to RM1.42 mainly to reflect: (1) higher US$ assumption of RM3.60/US$ (vs. RM3.50/US$ previously); and (2) higher target P/E of 11x (from 10x previously), gi ven Homeritz’s improving earnings visibility.
Source: Hong Leong Investment Bank Research - 31 Jul 2015

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