Daibochi’s  1QFY13  earnings  were  in  line  with  our  and  consensus’ estimates,  at  25.4%  of  our  full-year  numbers.  The  good  results  were underpinned  by  healthy  turnover  at  its  packaging  business,  decent margins  from  a  balanced  product  mix  and  good  wastage  controls.  We lift our FY13 forecast by 4.6% as we see a stronger 2H, boosted by new MNC contracts. Maintain NEUTRAL, with a higher MYR3.08 FV.   

-  Within  expectations.  Revenue  and  earnings  rose  7%  and  38.9%  y-o-y respectively due to a decent 4% topline growth at its packaging segment and  better  margins  arising  from  prudent  wastage  controls. The  segment saw  a  4%  increase  in  revenue  y-o-y  while  the  property  segment recognized non-recurring revenue totaling MYR1.7m from selling its stock of  units  released  from  the  bumiputera  quota.  Q-o-q  revenue  dipped marginally  by  0.5%  due  to  slower  orders  from  Australia  after  the Christmas  season  while  net  profit  surged  13.8%.  We  expect  better revenue  in  2H  when  the  new  contracts  from  multinational  companies (MNCs) start to kick in.  

-  Lucrative  margins.  The group’s profit  before  tax  (PBT)  was  higher  by 31.9% y-o-y, thanks to sterling showing from its two business segments. The packaging segment’s PBT expanded by 24% y-o-y, fuelled by higher sales,  a  favorable  product  mix  and  continued  improvements  in  wastage control.  The  property  segment,  meanwhile,  returned  to  the  black  by posting  PBT  of  MYR0.3m  vs  a  loss  of  MYR0.2m  last  year.  Daibochi’s overall  PBT  margin  widened  from  10.5%  to  12.9%  y-o-y,  supported  by 
better  margins  from  its  packaging  division  (+1.9%).  Since  the  group implemented  the  mandated  minimum  wages  earlier  this  year,  we  are optimistic  that  its  margins  are  sustainable  going  forward.  The  company has declared an interim tax-exempt dividend of 4 sen per share.

- Maintain NEUTRAL. We increase our FY13 earnings by 4.6% to reflect the  higher  revenue  from  new  MNC  contracts  in  2H.  This  bumps  up  our FV to MYR3.08 from MYR2.95. Daibochi’s dividend yield is still attractive at 5.1% despite the recent rally in its share price.

Source: RHB