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Author: kltrader   |   Latest post: Wed, 19 Jun 2019, 9:24 AM

 

Asia File Corporation - Within Expectation

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Maintain HOLD

3Q/9MFY3/19 earnings were within our expectation despite its EBITDA falling short. We maintain our FY19E-21E earnings for now, expecting better operational costs but lower associate profit. Maintain HOLD with an unchanged TP of MYR2.68 based on an unchanged FY19E PER peg of 11.6x (5-year historical mean PER). Dividend yield remains good (>5%).

Bottomline in-line …

AF reported a lower 3QFY19 net profit MYR10.7m (-44% YoY, -32% QoQ). This lifted 9MFY19 net profit to MYR34.4m (-28% YoY) which was in line at 77% of our full-year forecast. AF declared a second interim DPS of 4sen, bringing 9MFY19 DPS to 7sen, representing a 40% DPR.

… but operationally fell short

AF’s 9MFY19 EBITDA, however, was just 66% of our FY19E due to lower sales at MYR79.5m in 3QFY19 (-11% YoY, -5% QoQ) and MYR247.1m in 9MFY19 (-8% YoY), particularly from its ops in Germany and United Kingdom, which were compounded by the weaker GBP and EURO. Also, production cost was higher at MYR77.6m in 3Q19 (+14% QoQ) on machinery downtime. However, the shortfall in its EBITDA was offset by stronger associate profit contribution of MYR5.9m in 3Q19 (+15% QoQ).

Earnings forecasts unchanged

We maintain our FY19/20/21 earnings estimates for now, expecting higher operational cost efficiency from its on-going measures to optimize its labour and energy costs. However, it would be offset by lower associate profit due to a challenging outlook. We also maintain FY19 DPS forecast of 14sen, which translates to a yield of 5.4%. We expect management to declare a final DPS of 7sen after its 4QFY19 results which would bring DPR to 60% for FY19 vs. its 3-year historical of 50-60%.

Source: Maybank Research - 01 Mar 2019

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Labels: ASIAFLE

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