EKSONS (9016) - Eksons Corporation - Property boost in 3QFY15
Target RM1.50 (Stock Rating: HOLD)
At 111% of our FY15 core net profit, Eksons's annualised 9MFY15 core net profit is in-line with our expectations as we do not expect the strong property earnings in 3Q to be sustainable in 4Q, while plywood prices remain weak. We maintain our EPS forecasts and target price, based on an unchanged 20% discount to adjusted SOP/share; the SOP discount reflects its small market capitalisation and tight trading liquidity. The stock remains a Hold. We advise switching to Prestariang for exposure to the small-cap sector.
9MFY15 net profit up 148% due to EI gain
9MFY15’s revenue was up 74% yoy and net profit was a higher 148% mainly due to an EI land sale gain. However, 9MFY15’s core profit fell 61.2% yoy as plywood prices stayed weak. In 3QFY15, the property division recorded a pretax profit of RM10.0m after the hand-over of the last phase of shop offices under ‘The Atmosphere” project. However, we do not expect property earnings to be sustainable in 4QFY15. No interim DPS was declared, in line with our expectations.
Tough plywood market conditions
Plywood market conditions remain challenging. The Japanese economy is only just recovering from its recent recession, while the yen remains weak. Japan is the world’s largest importer of tropical hardwood. In addition, the industry is also facing competition from softwood plywood producers. Russia remains one of the major suppliers of softwood plywood, and the collapse of the rouble in the past six months has put further pressure on softwood plywood prices, indirectly affecting tropical plywood prices in the region. The Russian ruble currently trades at 60 to the US dollar, falling some 70% in just six months.
Cash-rich balance sheet
The company’s balance sheet is strong, with net cash of RM121m or RM0.74 net cash per share as at end-Dec. This is equivalent to 52% of its share price. The huge cash pile came about after the company sold its commercial land at its “The Atmosphere” project for RM140m cash. Unfortunately, we believe the company is not planning a special dividend but has instead indicated that it may use the cash to expand its property landbank around the Klang Valley. In 2015, the company is looking to launch a RM100m GDV residential development project in Bukit Serdang.
Source: CIMB Daybreak - 27 February 2015
Target RM1.50 (Stock Rating: HOLD)
At 111% of our FY15 core net profit, Eksons's annualised 9MFY15 core net profit is in-line with our expectations as we do not expect the strong property earnings in 3Q to be sustainable in 4Q, while plywood prices remain weak. We maintain our EPS forecasts and target price, based on an unchanged 20% discount to adjusted SOP/share; the SOP discount reflects its small market capitalisation and tight trading liquidity. The stock remains a Hold. We advise switching to Prestariang for exposure to the small-cap sector.
9MFY15 net profit up 148% due to EI gain
9MFY15’s revenue was up 74% yoy and net profit was a higher 148% mainly due to an EI land sale gain. However, 9MFY15’s core profit fell 61.2% yoy as plywood prices stayed weak. In 3QFY15, the property division recorded a pretax profit of RM10.0m after the hand-over of the last phase of shop offices under ‘The Atmosphere” project. However, we do not expect property earnings to be sustainable in 4QFY15. No interim DPS was declared, in line with our expectations.
Tough plywood market conditions
Plywood market conditions remain challenging. The Japanese economy is only just recovering from its recent recession, while the yen remains weak. Japan is the world’s largest importer of tropical hardwood. In addition, the industry is also facing competition from softwood plywood producers. Russia remains one of the major suppliers of softwood plywood, and the collapse of the rouble in the past six months has put further pressure on softwood plywood prices, indirectly affecting tropical plywood prices in the region. The Russian ruble currently trades at 60 to the US dollar, falling some 70% in just six months.
Cash-rich balance sheet
The company’s balance sheet is strong, with net cash of RM121m or RM0.74 net cash per share as at end-Dec. This is equivalent to 52% of its share price. The huge cash pile came about after the company sold its commercial land at its “The Atmosphere” project for RM140m cash. Unfortunately, we believe the company is not planning a special dividend but has instead indicated that it may use the cash to expand its property landbank around the Klang Valley. In 2015, the company is looking to launch a RM100m GDV residential development project in Bukit Serdang.
Source: CIMB Daybreak - 27 February 2015
