SINGAPORE (Mar 1): SAC Advisors is keeping its “buy” call on United Global with an unchanged target price of 50 cents after yet another earning beat from the lubricant manufacturer and trader.
“Despite already upgrading our numbers in October last year to account for the strong 1H results, [United Global] still managed to report full-year net profit ahead of our estimates,” says analyst Terence Chua in a Thursday report.
United Global saw its full-year earnings rise 62.5% to US$9.2 million ($12.1 million) for the FY17 ended December, on the back of a 9.0% rise in group revenue to US$99.8 million.
This was driven by higher revenue from its Manufacturing segment, which rose 56.6% to US$79.5 million on the back of contribution from PT Pacific Lubritama Indonesia (PLI), which was acquired in July 2017.
See: United Global posts 62.5% jump in FY17 earnings to US$9.2 mil
United Global’s FY17 revenue and earnings beat SAC’s estimates by 6% and 7.1%, respectively.
“Our current target price implies a 22.0% upside to the current price, as we maintain our FY18 and FY19 earnings forecast pending our meeting with management next week,” says Chua.
The way Chua sees it, the target price of 50 cents implies a price-to-earnings (PE) multiple of 12.7x and 12.2x for FY17 and FY18E, respectively, which is “not excessive”.
In addition, the analyst notes that United Global is in a net cash position, with high average ROE of 30% from FY17E-19E.
Shares of United Global last closed at 41 cents on Wednesday, or 8.7 times FY18 earnings.
