Stock Name: AJIYA
Company Name: AJIYA BHD
Ajiya Bhd
(July 11, RM1.76)
Maintain buy at RM1.76 with revised target price of RM2.17 (from RM2.25): During our recent visit, Ajiya's management appeared confident that the Economic Transformation Programme (ETP) may have positive spillover effects on the building materials sector. It thinks that the Greater Kuala Lumpur National Key Economic Area (NKEAs) will be a big boost for the sector while key projects such as Kuala Lumpur International Financial District (KLIFD) and mass rapid transit system (MRT) may potentially lift demand for the company's products. However, the contribution from these projects is only expected from 2H or later in 2012 at the earliest.
The company is expanding its metal roll-forming and safety glass manufacturing operations in Senai (Johor), Shah Alam (Selangor), Bukit Minyak (Penang) and Sungai Petani (Kedah) as it prepares to increase its market share as the projects rolled out under ETP gain momentum. The company also plans to establish a plant in Thailand later in 2012.
After a weak 1QFY11, management said the slow start to the year was due to delays in implementation of projects which led to pallid sales volume, higher operating costs on escalating raw material costs and the fact that some customers had shifted to lower margin, cheaper products. While we suspect the company may encounter a similar situation in 2Q and we see almost flattish q-o-q numbers, we are more upbeat on its 2H posting better numbers. Our view is premised on the fact that its new plants are set to be commissioned in the next few months while demand may also pick up as the momentum of projects under the ETP gets going.
As we expect slower 1H results, our FY11 net profit assumption is lowered by 13.5% to RM20.7 million while we expect Ajiya's revenue to increase by a marginal 3.1% to RM340 million. Rolling forward our valuation parameter to the stock's FY12 earnings per share and tagging a price-earnings ratio of 6.6 times, we derive a fair value of RM2.17. We still think Ajiya is a 'buy' given the still sufficient upside to our fair value moving into FY12 as the industry outlook improves and its balance sheet remains robust. ' OSK Research, July 11
This article appeared in The Edge Financial Daily, July 12, 2011.
Company Name: AJIYA BHD
| Research House: OSK | Price Call: BUY | Target Price: 2.17 |
Ajiya Bhd
(July 11, RM1.76)
Maintain buy at RM1.76 with revised target price of RM2.17 (from RM2.25): During our recent visit, Ajiya's management appeared confident that the Economic Transformation Programme (ETP) may have positive spillover effects on the building materials sector. It thinks that the Greater Kuala Lumpur National Key Economic Area (NKEAs) will be a big boost for the sector while key projects such as Kuala Lumpur International Financial District (KLIFD) and mass rapid transit system (MRT) may potentially lift demand for the company's products. However, the contribution from these projects is only expected from 2H or later in 2012 at the earliest.
The company is expanding its metal roll-forming and safety glass manufacturing operations in Senai (Johor), Shah Alam (Selangor), Bukit Minyak (Penang) and Sungai Petani (Kedah) as it prepares to increase its market share as the projects rolled out under ETP gain momentum. The company also plans to establish a plant in Thailand later in 2012.
After a weak 1QFY11, management said the slow start to the year was due to delays in implementation of projects which led to pallid sales volume, higher operating costs on escalating raw material costs and the fact that some customers had shifted to lower margin, cheaper products. While we suspect the company may encounter a similar situation in 2Q and we see almost flattish q-o-q numbers, we are more upbeat on its 2H posting better numbers. Our view is premised on the fact that its new plants are set to be commissioned in the next few months while demand may also pick up as the momentum of projects under the ETP gets going.
As we expect slower 1H results, our FY11 net profit assumption is lowered by 13.5% to RM20.7 million while we expect Ajiya's revenue to increase by a marginal 3.1% to RM340 million. Rolling forward our valuation parameter to the stock's FY12 earnings per share and tagging a price-earnings ratio of 6.6 times, we derive a fair value of RM2.17. We still think Ajiya is a 'buy' given the still sufficient upside to our fair value moving into FY12 as the industry outlook improves and its balance sheet remains robust. ' OSK Research, July 11
This article appeared in The Edge Financial Daily, July 12, 2011.
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