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Nam Lee still a stable yield play amid margin compression, says Phillip

Michelle Zhu
Michelle Zhu • 2 min read
Nam Lee still a stable yield play amid margin compression, says Phillip
SINGAPORE (May 7): Phillip Capital continues to rate Nam Lee Pressed Metal Industries at “buy” with an unchanged target price of 56 cents, which represents an implied 11.9 times FY18E forward P/E multiple and 0.97 times FY18E forward P/B multiple.
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SINGAPORE (May 7): Phillip Capital continues to rate Nam Lee Pressed Metal Industries at “buy” with an unchanged target price of 56 cents, which represents an implied 11.9 times FY18E forward P/E multiple and 0.97 times FY18E forward P/B multiple.

Following strong revenue growth but weaker-than-expected PATMI over 1H18, the research house has tweaked its FY18E revenue upwards by 8.1% and lowered its forward PATMI over the same period by 6.9% from previous estimates.

As such, Phillip has forecasted FY18E dividends of 2.5 cents, higher than FY17’s dividends of 2 cents, and maintains its view of the counter as a yield play.

In a Monday report, analyst Richard Leow says he continues to like the stock for its strong balance sheet and high yield of 6.8%, based on its 2.5-cent dividend over the last closing price of 37 cents.

Despite noting a less-upbeat management commentary tone, likely due to uncertainties in global developments over trade tariffs, the analyst expects Nam Lee to remain profitable this year.

“There was a net foreign exchange loss and net fair value adjustment loss in derivative recorded in 1H18. This was in contrast to a net foreign exchange gain and net fair value adjustment gain in derivative in 1H17. As a result, other operating costs were 86.4% higher y-o-y, while other income was 85.7% lower y-o-y,” recalls Leow.

“We are not so certain for revenue growth and expect it to moderate in 2H18. We currently assume 8.5% y-o-y revenue growth for 2H18. Catalyst for the stock would be contract wins for the building products business, following the ramp-up in infrastructure projects and collective sales activity,” he concludes.

As at 11.24pm, shares in Nam Lee are trading 1.4% higher at 38 cents or 0.66 times FY18E book.

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