Stock Name: TANJONG
Company Name: TANJONG PUBLIC LIMITED COMPANY
Research House: HWANGDBS
Tanjong plc
(March 25, RM17.90)
Maintain buy at RM17.74, target price raised to RM19.50: Tanjong's result for its financial year ended Jan 31, 2010 (FY10) was within ours and market expectations with stronger power earnings.
Tanjong's FY10 revenue grew 5% led by higher contribution from all divisions. Net profit grew 46% year-on-year (y-o-y) despite only 25% growth in power earnings due to lower business development cost (RM114 million) and windfall tax (RM85 million), but gaming earnings before interest and tax (Ebit) fell 20% due to higher racing totalisator expenses. Excluding one-off items, FY10 net profit was flat y-o-y at RM677 million due to lower gaming margin (down six percentage points) as a result of special draws and racing totalisator (RTO) losses.
FY10 gross dividend per share (DPS) of RM1 implies 4% net yield. Tanjong declared a fourth interim gross DPS of 17.5 sen and a final 30 sen DPS, bringing FY10 gross DPS to RM1 (90 sen for FY09). We expect DPS to rise gradually as Tanjong plans to maintain a progressive dividend policy and achieve a balance between long-term growth and shareholder returns.
We continue to favour Tanjong for its good earnings visibility and potential earnings boost from new acquisition and number forecasting operation (NFO) games, unlocking value of its power and gaming businesses, and turnaround of Tropical Island after overnight accommodation is completed by end calendar year 2010.
Despite the run-up in the share price (+32% over last 12 months), Tanjong's valuation remains reasonable at 10 times CY11 price-to-earnings ratio (PER) against regional peers' average of 14 times. Maintain buy with upgraded sum-of-parts derived target price of RM19.50 per share after rolling forward our valuation window. - HwangDBS Vickers Research, March 25
This article appeared in The Edge Financial Daily, March 26, 2010.
Company Name: TANJONG PUBLIC LIMITED COMPANY
Research House: HWANGDBS
Tanjong plc
(March 25, RM17.90)
Maintain buy at RM17.74, target price raised to RM19.50: Tanjong's result for its financial year ended Jan 31, 2010 (FY10) was within ours and market expectations with stronger power earnings.
Tanjong's FY10 revenue grew 5% led by higher contribution from all divisions. Net profit grew 46% year-on-year (y-o-y) despite only 25% growth in power earnings due to lower business development cost (RM114 million) and windfall tax (RM85 million), but gaming earnings before interest and tax (Ebit) fell 20% due to higher racing totalisator expenses. Excluding one-off items, FY10 net profit was flat y-o-y at RM677 million due to lower gaming margin (down six percentage points) as a result of special draws and racing totalisator (RTO) losses.
FY10 gross dividend per share (DPS) of RM1 implies 4% net yield. Tanjong declared a fourth interim gross DPS of 17.5 sen and a final 30 sen DPS, bringing FY10 gross DPS to RM1 (90 sen for FY09). We expect DPS to rise gradually as Tanjong plans to maintain a progressive dividend policy and achieve a balance between long-term growth and shareholder returns.
We continue to favour Tanjong for its good earnings visibility and potential earnings boost from new acquisition and number forecasting operation (NFO) games, unlocking value of its power and gaming businesses, and turnaround of Tropical Island after overnight accommodation is completed by end calendar year 2010.
Despite the run-up in the share price (+32% over last 12 months), Tanjong's valuation remains reasonable at 10 times CY11 price-to-earnings ratio (PER) against regional peers' average of 14 times. Maintain buy with upgraded sum-of-parts derived target price of RM19.50 per share after rolling forward our valuation window. - HwangDBS Vickers Research, March 25
This article appeared in The Edge Financial Daily, March 26, 2010.
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