Results Within Expectation
Boilermech’s 1HFY14  results  were within  our forecasts, with  its  revenue of  MYR106.8m  accounting for about 50% of our full-year estimate while its PBT of MYR18.2m clocked in at 46% of our full-year target. 1HFY14 net profit was up 26% y-o-y to MYR13.5m on the back of 22% yo-y increase in revenue. Boilermech proposed a few corporate exercises including (i) transfer  listing to Main Market, (ii) 1-for-1 bonus issue,and (iii)  to double its  share capital to MYR100m.  We are introducing our FY15 forecasts  and maintaining our Neutral stance on Boilermech with a higher FV of MYR2.27,  by pegging  16x FY15 P/E. We deem  the 16x P/E  fair as it implies a  3-year average  price earnings-to-growth ratio (PEG) of 0.75x. Boilermech had MYR66 net cash as at end-Sept.

Within expectation.  Boilermech’s  1HFY14  results  were within  our forecast,  with its revenue of MYR106.8m accounting for about 50% of our full-year estimate while its PBT of MYR18.2m clocked in at 46% of our full-year target.  Due to the change of financial year end (FYE) from April to  March,  Boilermech’s  1HFY13  results  represent  six  months’  contribution  for  May  –  Oct  2012  periods  whilst  1HFY14  results  consist  of  6-month  contribution  for  Apr  –  Sep  2013  periods.  1HFY14  net  profit  was  up  26%  y-o-y  to  MYR13.5m  on  the  back  of  22%  y-o-y  increase  in revenue. The better results were mainly due to higher activity levels in its manufacturing, deliveries and installation of boilers. 2QFY14 revenue increased 7% q-o-q to MYR55.3m from MYR51.5m in 1Q14 and PBT was up 13% q-o-q to MYR9.6m.  EBIT margin improved to 17.5% in 2QFY14 from 16.6% in 1Q14, primarily due to certain projects that offer higher margins.

Transfer listing to Main Board. Earlier this month, Boilermech  has announced its intention to transfer listing from ACE Market to Main Market of Bursa Malaysia Securities Bhd. In addition, the company has proposed 1-for-1 bonus issue to issue 258m of bonus shares to its shareholder. It  also  proposed  to  increase  its  authorised  share  capital  from  MYR50m  comprising  500m  shares  to  MYR100m  comprising  1b  shares.  Upon completion of the proposed bonus issue, the enlarged issued and paid-up share capital of Boilermech will be MYR51.6m comprising 516m of Boilermech shares. Meanwhile, we are upbeat on the transfer listing to Main Board as it may help to strengthen Boilermech’s credibility and to improve marketability of its shares, especially to institutional investors.

Maintain  NEUTRAL,  FV  revised  to  at  MYR2.27.  Going  forward,  the  fundamental  of  the  company  remained  unchanged,  underpinned  by  its solid balance  sheet  and  orderbook would be supported by  strong growth in palm plantation industry and other agriculture-related industries to support its boiler manufacturing.  We are introducing our FY15 forecasts, FV has been revised to MYR2.27, pegged its FY15F EPS of 14.2  sen to a  16x  P/E.  We deem  the 16x P/E  fair as it implies a  3-year average price earnings-to-growth ratio (PEG) of 0.75x.  The company is still in net cash position of MYR66m as at end-Sep.

Source: RHB