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♦ 2Q10 results expected to be stronger by around 5% qoq, from higher sales volume coupled with higher ASP. Current capacity utilisation rate is >80% while ASP strengthened by 3% in 2Q10 vs. 1Q10. Total cost of production has dropped by 2.5% in 2Q10 vs. 1Q10.
♦ Indonesia operations to be commissioned in 2H10. To be conservative, we have only assumed contributions to start from FY11 onwards. However, if the plant is commissioned on time, this could potentially raise our FY10 EPS forecast by 5%.
♦ Growth is expected to mainly come from an improvement of market share and reduction in cost of production. Plans to grow both its Thailand and Indonesia market shares to 5% (from <2%) and 10% (from 6%), respectively in the near term. May try to further reduce cost of production through the securing of rubberwood log supply (by acquisition) and ownership of third glue plant. Any acquisitions of existing MDF players would only take place earliest in 2012.
♦ FY10-11 net dividend payout assumptions of 40-45% translate to an attractive net yield of 6-7% p.a..
♦ FY10-12 earnings forecasts reduced by 1.4-3.2% p.a. after updating US$/MYR assumptions, FY09 numbers, and increasing dividend payout assumptions.
♦ Fair value of RM2.30 (from RM2.35) based on unchanged target PER of 11x FY12/10 earnings.
RHB Equity 360° - 2 June 2010 (Evergreen, Semicon, AFG, SapuraCrest; Technical: AMMB) - 2/6/2010
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