AIRASIA (5099) - Asia File Corporation - Europe blues persist
Target RM3.65 (Stock Rating: HOLD)
At 69% of annualised FY15 net profit, 9MFY15 net profit was below our expectations, mainly due to the weaker euro and pound sterling, as well as higher operating costs. We cut our FY15-17 EPS forecasts by 13-18% to reflect higher cost pressures and continued weakness in the euro. Our target price falls based on an unchanged 10.8x CY16 P/E, at a 10% discount to the sector’s 12x target P/E. The 10% discount is to reflect the stock’s tight trading liquidity. We keep our Hold call as the stock is still not cheap. We prefer QL Resources for exposure to the consumer sector.
9MFY15 net profit down 19% yoy
9MFY15 revenue was up 10.3% yoy but net profit fell a disappointing 19% yoy. The latter was mainly due to the weaker pound sterling and euro over the past two quarters and higher operating costs from a new overseas subsidiary. Interim DPS was 6 sen, in line with our expectations. 9MFY15 forex loss was RM1.1m.
Growing Europe market
Europe remains Asia File’s largest export market, comprising more than 65% of group revenue. In 2014, the company penetrated the France and Czech stationery market after acquiring machinery from two companies in these countries. The owners of these two companies now outsource their production needs to Asia File, expanding the company’s presence in Europe. However, we believe these acquisitions have led to an increase in the company’s operating costs. 9MFY15 operating cost rose 16.1% yoy, much higher than the revenue gain in the same period.
Net cash position on balance sheet
Asia File’s balance sheet is RM60m net cash rich or RM0.33 net cash per share. This would help the company fund potential M&As in Europe or the US when the opportunity arises. We believe the company has no M&A plans in the region as management remains focused on Europe and the US. The company recently completed a 3:5 basis bonus shares, which should help improve the stock’s trading liquidity. The stock’s lack of liquidity is a concern, with an average of less than US$0.1m shares traded daily. The last time Asia File proposed a bonus issue was in 2007, also on the 3:5 basis.
Source: CIMB Daybreak - 02 March 2015
Target RM3.65 (Stock Rating: HOLD)
At 69% of annualised FY15 net profit, 9MFY15 net profit was below our expectations, mainly due to the weaker euro and pound sterling, as well as higher operating costs. We cut our FY15-17 EPS forecasts by 13-18% to reflect higher cost pressures and continued weakness in the euro. Our target price falls based on an unchanged 10.8x CY16 P/E, at a 10% discount to the sector’s 12x target P/E. The 10% discount is to reflect the stock’s tight trading liquidity. We keep our Hold call as the stock is still not cheap. We prefer QL Resources for exposure to the consumer sector.
9MFY15 net profit down 19% yoy
9MFY15 revenue was up 10.3% yoy but net profit fell a disappointing 19% yoy. The latter was mainly due to the weaker pound sterling and euro over the past two quarters and higher operating costs from a new overseas subsidiary. Interim DPS was 6 sen, in line with our expectations. 9MFY15 forex loss was RM1.1m.
Growing Europe market
Europe remains Asia File’s largest export market, comprising more than 65% of group revenue. In 2014, the company penetrated the France and Czech stationery market after acquiring machinery from two companies in these countries. The owners of these two companies now outsource their production needs to Asia File, expanding the company’s presence in Europe. However, we believe these acquisitions have led to an increase in the company’s operating costs. 9MFY15 operating cost rose 16.1% yoy, much higher than the revenue gain in the same period.
Net cash position on balance sheet
Asia File’s balance sheet is RM60m net cash rich or RM0.33 net cash per share. This would help the company fund potential M&As in Europe or the US when the opportunity arises. We believe the company has no M&A plans in the region as management remains focused on Europe and the US. The company recently completed a 3:5 basis bonus shares, which should help improve the stock’s trading liquidity. The stock’s lack of liquidity is a concern, with an average of less than US$0.1m shares traded daily. The last time Asia File proposed a bonus issue was in 2007, also on the 3:5 basis.
Source: CIMB Daybreak - 02 March 2015
