Exceptional margins; Exxon Mobil contract in the bag
• Below expectations. 4Q07 net profit of S$12.4m (+54% yoy) was 23% below our expectations but in line with market consensus (S$13.1m). FY07 net profit of S$52.8m (+50% yoy) was 7% below our full-year estimate but in line with consensus (S$53.7m). The shortfall was due to lower-than-expected order-book recognition, which has likely been pushed out to this year.
• 4Q07 sales declined 16% yoy to S$98.9m, as fewer projects reached peak recognition threshold than in 4Q06, when major milestones were reached for the Universal Terminal project.
• Exceptional margins. 4Q07 gross margins grew 200bp yoy to 41% while EBITDA margins jumped 800bp yoy to 20%. The leap came from back-end loading of final profit recognition for Universal Terminal. However, to be conservative, we are retaining our gross margin assumption of 21% and EBITDA margin of about 14% for FY08.
• Exxon Mobil expansion project finally awarded. YTD order book is at a record S$640m. Management indicated that the long-awaited Exxon Mobil project has been partially awarded but not disclosed due to commercial terms. We estimate the value of the contract at S$120m and expect more piecemeal awards to continue in the coming months.
• Middle East and Singapore growth markets. Rotary is eyeing at least two sizeable projects (above US$500m each) in the Middle East and a few storage tank contracts in Singapore. Our order assumption for 2008 remains at S$485m.
• Maintain Outperform and target price of S$1.44, still based on 12x CY09 EPS. Rotary proposed a final dividend of 2.3 Scts, bringing the total dividend to 4.6 Scts for a yield of 5%. We see positive newsflow from contract wins as catalysts for the stock. Upside potential could come from higher-than-expected margins. Valuations remain undemanding at 9x CY08 and 8x CY09 EPS, still at huge discounts to regional peers.
• Below expectations. 4Q07 net profit of S$12.4m (+54% yoy) was 23% below our expectations but in line with market consensus (S$13.1m). FY07 net profit of S$52.8m (+50% yoy) was 7% below our full-year estimate but in line with consensus (S$53.7m). The shortfall was due to lower-than-expected order-book recognition, which has likely been pushed out to this year.
• 4Q07 sales declined 16% yoy to S$98.9m, as fewer projects reached peak recognition threshold than in 4Q06, when major milestones were reached for the Universal Terminal project.
• Exceptional margins. 4Q07 gross margins grew 200bp yoy to 41% while EBITDA margins jumped 800bp yoy to 20%. The leap came from back-end loading of final profit recognition for Universal Terminal. However, to be conservative, we are retaining our gross margin assumption of 21% and EBITDA margin of about 14% for FY08.
• Exxon Mobil expansion project finally awarded. YTD order book is at a record S$640m. Management indicated that the long-awaited Exxon Mobil project has been partially awarded but not disclosed due to commercial terms. We estimate the value of the contract at S$120m and expect more piecemeal awards to continue in the coming months.
• Middle East and Singapore growth markets. Rotary is eyeing at least two sizeable projects (above US$500m each) in the Middle East and a few storage tank contracts in Singapore. Our order assumption for 2008 remains at S$485m.
• Maintain Outperform and target price of S$1.44, still based on 12x CY09 EPS. Rotary proposed a final dividend of 2.3 Scts, bringing the total dividend to 4.6 Scts for a yield of 5%. We see positive newsflow from contract wins as catalysts for the stock. Upside potential could come from higher-than-expected margins. Valuations remain undemanding at 9x CY08 and 8x CY09 EPS, still at huge discounts to regional peers.
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1 comment:
Excellent
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