Better than anticipated H1 results. BH Global delivered a sterling set of results for 1H07, which came in stronger than expected. The Company posted net earnings of S$8.3 mil (+59.1% yoy) on revenue of S$39.4 mil (+73.9% yoy). Gross profit margin improved marginally from 40.9% in the previous corresponding period to 41.0%, while net profit margin declined from 23.1% to 21.1%.
Stronger contributions from all segments. Better-than-expected results were attributed to stronger contributions from both the marine electrical equipment and marine consumables sectors. It was further boosted by several large offshore projects undertaken by the Company during the period. The Company continued to benefit from the buoyancy of the sector, and the amount of rig- and ship-building work being carried out in Singapore, as revenue contributions from Singapore improved 82.9% yoy.
New distributorship to lend boost to H2. We expect 2H07 to come in stronger than 1H07, as the Company finalizes its new distributorship for Prysmian-branded cables. The new distributorship for Prysmian (formerly known as Pirelli), the no. 2 brand of marine cables worldwide, was acquired through the Company’s new subsidiary. BH Global will serve as Prysmian’s first portal in the region.
Upgrade of fair value estimate to S$0.85. On the back of a strong H1, we have adjusted our topline estimates for FY07 and FY08 by 13.2% and 16.3%, respectively. Accordingly, we have also adjusted net earnings projections upwards for FY07 (+20.1%) and FY08 (+20.0%). Pegged to 12x FY08 earnings, our fair value estimate has been adjusted to S$0.85.
Re-rating to HOLD following strong run-up in share price. Despite our fair value estimate revision, we are downgrading our call on BH Global to HOLD. Following the strong run-up in share price since our initiation on 04 July 07, we are of the view that the Company’s earnings potential has been appropriately priced in. Downgrade to HOLD with fair value estimate of S$0.85
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