ORIENT (4006) - Oriental Holdings - Strong automotive performance
Target RM7.57 (Stock Rating: HOLD)
Oriental’s FY14 core net profit beat our forecast by 11%, mainly due to stronger-than-expected automotive earnings. It declared an interim DPS of 6 sen, which was above our dividend estimate of 4 sen per share for the interim and 8 sen for the full year. We expect Oriental to declare the final dividend by May. We raise our FY15-16 EPS by 10% to account for stronger automotive earnings. This leads to a higher target price of RM7.57, based on its 5-year historical average P/BV of 0.9x. The stock remains a Hold due to limited upside potential. We prefer First Resources for exposure to the regional planters.
Highlights from the results
Oriental’s 4Q14 reported net profit surged 60% yoy due mainly to recognition of a foreign exchange gain of RM32m and a turnaround in its automotive division. We believe the weaker ringgit allowed the group to recognise translation gains from its holdings of non-ringgit currencies. Oriental had approximately RM160m worth of cash denominated in US$ at end-2013. The 7% drop in RM against the US$ in 4Q would increase the ringgit value of its US$ cash holdings. Its automotive division also achieved stronger results by delivering a profit before tax (PBT) of RM11m in 4Q14 against a loss before tax of RM30m in 4Q13. The group attributed the better automotive performance to higher car sales in Malaysia and Singapore. Plantation and investment holding divisions also achieved better performances. Plantation PBT rose 21% yoy to RM60m while investment holding PBT rose 21% yoy to RM61m.
Higher EPS forecasts
We raise our FY15-16 EPS by c.10% to reflect higher contribution from its automotive division. The number of cars sold by Oriental in Malaysia and Singapore rose 53% in 2014 as it opened two new branches in Malaysia. Although its auto parts manufacturing and assembly operations could remain unprofitable, the overall automotive division should stay in the black as a result of the contributions from its retail operations.
Expect higher full year DPS for FY14
We also raise our DPS forecast for FY14 to 12sen following the announcement of the interim DPS of 6sen. For the past two financial years, the company’s final dividend has been similar to its interim dividend.
Source: CIMB Daybreak - 18 February 2015
Target RM7.57 (Stock Rating: HOLD)
Oriental’s FY14 core net profit beat our forecast by 11%, mainly due to stronger-than-expected automotive earnings. It declared an interim DPS of 6 sen, which was above our dividend estimate of 4 sen per share for the interim and 8 sen for the full year. We expect Oriental to declare the final dividend by May. We raise our FY15-16 EPS by 10% to account for stronger automotive earnings. This leads to a higher target price of RM7.57, based on its 5-year historical average P/BV of 0.9x. The stock remains a Hold due to limited upside potential. We prefer First Resources for exposure to the regional planters.
Highlights from the results
Oriental’s 4Q14 reported net profit surged 60% yoy due mainly to recognition of a foreign exchange gain of RM32m and a turnaround in its automotive division. We believe the weaker ringgit allowed the group to recognise translation gains from its holdings of non-ringgit currencies. Oriental had approximately RM160m worth of cash denominated in US$ at end-2013. The 7% drop in RM against the US$ in 4Q would increase the ringgit value of its US$ cash holdings. Its automotive division also achieved stronger results by delivering a profit before tax (PBT) of RM11m in 4Q14 against a loss before tax of RM30m in 4Q13. The group attributed the better automotive performance to higher car sales in Malaysia and Singapore. Plantation and investment holding divisions also achieved better performances. Plantation PBT rose 21% yoy to RM60m while investment holding PBT rose 21% yoy to RM61m.
Higher EPS forecasts
We raise our FY15-16 EPS by c.10% to reflect higher contribution from its automotive division. The number of cars sold by Oriental in Malaysia and Singapore rose 53% in 2014 as it opened two new branches in Malaysia. Although its auto parts manufacturing and assembly operations could remain unprofitable, the overall automotive division should stay in the black as a result of the contributions from its retail operations.
Expect higher full year DPS for FY14
We also raise our DPS forecast for FY14 to 12sen following the announcement of the interim DPS of 6sen. For the past two financial years, the company’s final dividend has been similar to its interim dividend.
Source: CIMB Daybreak - 18 February 2015
