Journey to Wealth
BHIC - Secures RM70mil naval maintenance job
- We maintain our HOLD call on Boustead Heavy Industries Corp (BHIC), but our sum-ofparts-based fair value of RM2.90/share (which implies an FY13F PE of 15x ' a 10% discount to Singapore Technologies Engineering Ltd's 2-year average of 17x) remains UNDER REVIEW.
- BHIC's 21%-owned Boustead Naval Shipyard (BNS) has secured a three-year maintenance contract worth RM70mil from the Ministry of Defence Malaysia to supply and deliver spare parts, maintenance services and training for the 23rd Frigate Squadron of the Royal Malaysian Navy.
- This contract is within expectations as we have already assumed an annual naval maintenance contract of RM150mil for FY12F-FY15F. But we are currently reviewing our forecasts given the ongoing soft quarterly earnings performance of the group.
- Recall that the delivery of two accommodation crane barges to Swire Pacific Offshore Ltd could be postponed until the end of the year. These delays for the group's sole remaining commercial project stem from weak execution capabilities, and were exacerbated by a weak external charter market which led to Swire imposing stringent quality requirements.
- Additionally, BNS has been served a RM100mil legal suit by Raja Jaafar Raja Harun and a contractor called Ingat Kawan (M) Sdn Bhd for alleged defamation by one of its former employees. BNS is disputing the claims, which effectively translates into 44% of BHIC's FY13F earnings.
- As the sole military yard in the country with a net order book of RM2.4bil currently, BHIC's order book prospects are clearly unrivalled among equipment fabricators in the country. But for any significant re-rating on the stock to materialise, the group will need to demonstrate a sustainable earnings turnaround, coupled with a consistent execution record for timely delivery.
- The stock currently trades at a fair FY13F PE of 10x ' which translates into a 44% discount to Singapore Technologies Engineering Ltd's FY13F PE of 18x. We view the discount as justified given the group's weak earnings track record.
Source: AmeSecurities
Related Stocks
| Chart | Stock Name | Last | Change | Volume |
|---|
Market Buzz
More articles on Journey to Wealth
Ekovest: No plan to launch another offer for Iskandar Waterfront City
Created by kiasutrader | Mar 29, 2018
Kenanga Research - On our Portfolio - Parliament dissolution around the corner?
Created by kiasutrader | Mar 25, 2013
Plantation Sector - Proposed accounting standard scrapped OVERWEIGHT
Created by kiasutrader | Mar 25, 2013
Pavilion Reit - Limited upside, earnings upside have been priced in HOLD
Created by kiasutrader | Mar 25, 2013
Discussions
Be the first to like this. Showing 0 of 0 comments
Post a Comment
Featured Posts
Latest Videos
Apps
Top Articles
2
3
4
save malaysia!
Visa-free travel to China extended for Malaysians to 30 days
5
6
Koon Yew Yin's Blog
CPO price is rising rapidly as shown by chart below - Koon Yew Yin
7
Axcapital's investment blog
KAB - Executing its way to a record quarter. Could more Petronas contracts be coming?
8
BFM Podcast
#
Stock
Score
Daily Stocks
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Featured Advertisers / Partners
Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
