Zhulian Corp Bhd (Jan 10, RM1.84)
Maintain buy at RM1.77 with target price of RM2.30: Strong free cash flow of seven sen to 14 sen per share for FY11 to FY13F is supported by 11.3% earnings compound annual growth rate and low maintenance capital expenditure (less than RM10 million per year), while its RM135 million cash pile (29 sen per share as at Aug 31, 2011) will continue to support a 60% dividend payout. This translates into 13.9 sen dividend per share (DPS) or 8.1% net yield, one of the highest in our universe.
Zhulian’s 4QFY11 (results out mid-January) should register RM25.3 million net profit (+20% quarter-on-quarter [q-o-q]) and RM95.3 million revenue (+3%). These will be driven by: (i) year-end rush to achieve 2011 sales targets in order to qualify for Zhulian’s Diamond International Forum 2011 in Dubai; and (ii) the US dollar appreciating 4% q-o-q against the ringgit in September to November 2011, which should result in 4% to 5% net positive impact on earnings. The Thailand floods had minimal impact on its regional office and warehouse in Nontaburi, and it has met its internal sales target.
We expect FY12F net profit to grow 15% year-on-year (y-o-y) to RM106.6 million on the back of RM410.5 million revenue (+12% y-o-y), despite global economic concerns. Zhulian’s earnings were resilient during the 2008/09 crisis — FY08 net profit grew 27% y-o-y and FY09 grew 10%. In FY12F, Thailand will be the biggest contributor at 52% of group revenue, followed by Malaysia at 44%. We expect 22% earnings before interest and tax (Ebit) margin (against FY11F’s 21.6%) backed by stable raw material prices and US dollar/ringgit rate. Maintain “buy” and RM2.30 target price based on 6% yield in FY12F, in line with its historical average. — HwangDBS Vickers Research, Jan 10
This article appeared in The Edge Financial Daily, January 11, 2012.
Maintain buy at RM1.77 with target price of RM2.30: Strong free cash flow of seven sen to 14 sen per share for FY11 to FY13F is supported by 11.3% earnings compound annual growth rate and low maintenance capital expenditure (less than RM10 million per year), while its RM135 million cash pile (29 sen per share as at Aug 31, 2011) will continue to support a 60% dividend payout. This translates into 13.9 sen dividend per share (DPS) or 8.1% net yield, one of the highest in our universe.
Zhulian’s 4QFY11 (results out mid-January) should register RM25.3 million net profit (+20% quarter-on-quarter [q-o-q]) and RM95.3 million revenue (+3%). These will be driven by: (i) year-end rush to achieve 2011 sales targets in order to qualify for Zhulian’s Diamond International Forum 2011 in Dubai; and (ii) the US dollar appreciating 4% q-o-q against the ringgit in September to November 2011, which should result in 4% to 5% net positive impact on earnings. The Thailand floods had minimal impact on its regional office and warehouse in Nontaburi, and it has met its internal sales target.
We expect FY12F net profit to grow 15% year-on-year (y-o-y) to RM106.6 million on the back of RM410.5 million revenue (+12% y-o-y), despite global economic concerns. Zhulian’s earnings were resilient during the 2008/09 crisis — FY08 net profit grew 27% y-o-y and FY09 grew 10%. In FY12F, Thailand will be the biggest contributor at 52% of group revenue, followed by Malaysia at 44%. We expect 22% earnings before interest and tax (Ebit) margin (against FY11F’s 21.6%) backed by stable raw material prices and US dollar/ringgit rate. Maintain “buy” and RM2.30 target price based on 6% yield in FY12F, in line with its historical average. — HwangDBS Vickers Research, Jan 10
This article appeared in The Edge Financial Daily, January 11, 2012.
