Stock Name: FITTERSCompany Name: FITTERS DIVERSIFIED BHD| Research House: RHB | Price Call: BUY | Target Price: 1.10 |
KUALA LUMPUR: RHB Research Institute said against a backdrop of a depressed stock market, realistically, funding for Fitters Diversified's green energy ventures will now have to come mainly from debt instead of equity.
It said on Wednesday, Oct 19 that Fitters had budgeted RM40 million capital expenditure for its green energy ventures in FY12/12 of which RM30 million would go to third-party green palm oil milling and the remaining RM10 million to biomass-based green energy projects.
'Apart from green palm oil milling, Fitters is currently evaluating a long list of greenfield/brownfield green energy ventures in the Philippines and Singapore to invest in for the long haul. These will be carried out on a build, operate and transfer (BOT) basis, based on biomass sources such as coconut shell, rice husk, garden/landscaping refuse and animal waste including chicken dressing,' it said.
RHB Research said for green palm oil milling, Fitters is closing in on deals with eight third-party palm oil mills.
It also said the company indicated that its previous FY12/11 net profit guidance of RM35 million will not be achievable due to the delay in the launching of Phase 3 of its ZetaPark project in Setapak, Kuala Lumpur, as well as lower palm oil milling profits.
'We are cutting FY12/11-13 net profit forecasts by 17%-28% to reflect these,' it said.
It accorded a fair value of RM1.10. This is having valued its fire prevention, CONSTRUCTION [] and palm oil milling businesses at 10 times one-year forward PER, property business by discounting back the potential profits from RM338 million GDV to NPV at 10% and green energy business by the DCF model with a discount rate that is equivalent to Fitters' WACC of 8.9%.
