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Saturday, February 27, 2016

[Shaun Loong] - KIMHIN Quarterly Review FY2015Q4

[Shaun Loong] - KIMHIN Quarterly Review FY2015Q4

Author: Shaun Loong   |   Publish date: Fri, 26 Feb 2016, 12:29 AM 



All information, including recommendation provided in this article reflects my personal view and opinion only. 

HIGHLIGHTS

  • Revenue growth in all geographical segments
  • Optimistic management on business prospects
  • Revised target price from RM 4.90 to RM 4.54 based on actual FY2015 data

REVIEW

  • Accounting profit dragged down by deferred income tax from previous year and exchange translation differences. KIMHIN's income tax for the quarter ballooned by 62% on deferred income tax adjustments (QR - Note 13). Meanwhile, exchange translations differences for current quarter registered a loss of RM 4.509 million against a gain of RM 5.306 last year. Operational cash flow for FY2015 remain excellent with 28.2% growth y-o-y.
  • Healthy top-line growth of 10% q-o-q and 17.2% y-o-y. Operations in all geographic locations saw positive growth with Malaysia (+10.2%), China (+13.1%), Australia (+53.8%) and Vietnam (+419%). Increase in revenue was due to excellent growth in Malaysia and better contributions from Johnson Tiles Pty Limited.
  • Mixed earnings result from geographical segments. Results in Malaysia and China remained solid, registering growth of 138% and 21.6% respectively. Meanwhile, operations in Australia sunk into a loss of RM 3k from a profitable RM 796k earnings. Vietnam's operations have yet to become profitable, although KIMHIN has managed to pare down losses as operations approach profitability.
  • Looking forward, the Group expects FY2016 results to be favorable subject to performance of national and regional economies, fluctuation in main operating costs and forex rates.

VALUATION

Target price 1
  • Adjusted actual EBIT for FY2015 is RM 44.659 million, which slightly under-perform estimated EBIT of RM 48.765 million. Nevertheless, EBIT grew 76.6% q-o-q.
  • Capex and taxes reported a higher % of EBIT, at 32.3% and 15.8% of EBIT respectively.
Revised 5-Y DCF based on actual data of full year 2015 results with target price of RM 4.20. This is based on; (i) WACC of 9.6% (ii) 8% EBIT supernormal growth (iii) terminal growth at risk free rate.
Target price 2
Actual EPS for FY2015 is 24.68 cents. Assuming 8% growth for FY2016 + EPS 7.1 cents from cost savings, at P/E of 14.41 (industry average by Reuters), target price for KIMHIN is RM 4.87.
Maintain BUY with a target price range between RM 4.20-4.87, a relative deviation of 7.4%. Average target price for the stock in FY2016 is RM 4.54.

Thank you.
Shaun Loong
Disclosure: At time of publication, I own stocks in KIMHIN.
All content are obtained from sources which are deemed to be reliable. I do not guarantee the accuracy, completeness or timeliness of the information nor can I be held liable for any losses arising from the use of information provided in this article.

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