What’s New

• Boilermech Holdings Bhd announced that PT Boilermech Manufacturing Indonesia (PTBMI) which is wholly-owned by Boilermech and its subsidiary PT Boilermech has signed an agreement with PT Maspion Industrial Estate to acquire land in East Java for IDR54b or RM15.66m cash.

• The total land acquire is 30,000 square meters. The Group intended to build a new manufacturing plant which mainly caters for the fabrication of palm oil mill boilers.

• The proposed acquisition is expected to be completed in 3Q of 2019.

Comments

• Nourishing Bio-energy’s segment. Following the announcement, we reckon the acquisition will improve the Bio-energy’s division following higher demand of boiler in Indonesian market as compared to Malaysian market. Upon completion of new plant, the order book will improved as the new plant to cater the new order from Indonesian market thus will reflect to better Group’s future earnings.

• Cash utilization. As year to date, the Group has RM16m cash. The Group did propose any borrowing and will buy the land using internal funds. This was in line with the Group’s strategic plan to conserving cash, which be used for any potential acquisition in either Malaysia or Indonesia should the opportunity arises.

Earnings Outlook

• No change to our core earnings estimates of RM21.8m (+6.0% yoy) for FY19F, RM24.2m (+11.1% yoy) for FY20F and RM26.5m for FY21F (+9.6% yoy).

Valuation/Recommendation

• Maintain HOLD call for Boilermech with a target price of RM0.59. Our valuation is pegged at 12.5x FY20F PER to better reflect prevailing challenging outlook in plantation sector as affected by weaker CPO price. Our valuation is slightly lower than its mean PE of 17.6x.

Source: JF Apex Securities Research - 24 Apr 2019