EITA  is  a  manufacturer  and  distributor  of  elevators  and  busduct systems.  We believe the group will benefit from the growth in the localand  regional  construction sectors,  as  management plans to expand its manufacturing  operations  to  meet  the  growing  demand.  The  stock  is currently NOT RATED, with a FV of MYR1.51, pegged at  an 10.5x CY14F P/E.

• Background.  EITA  Resources  (EITA)  started  out  as  a  distributor  of electrical and electronics (E&E) equipment and components. The group ventured into elevator services as a result of a technical agreement with Schneider  Steuerungstechnik  GmbH  (Schneider),  a  world  leader  in elevator  systems.  The  company  also  manufactures  busduct  systems, having acquired Furutec Electrical SB (Furutec) in 2009.
• Elevator  and  busduct  manufacturer.  EITA  is  a  one-stop  elevator service provider  that is  able to provide the whole spectrum of services ranging  from design and manufacturing  to maintenance.  The group also manufactures busduct systems, ie  electrical connectors  used in place of normal wires for buildings and industrial areas with a heavy current load. Given the slew of upcoming construction projects  locally, along with its complementary  E&E  equipment  and  components  trading,  this  will potentially provide a boost to EITA’s earnings.
• Regional player.  In its 13 years of business, EITA has delivered 1,880 elevator  systems  –  along  with  busducts  –  in  Malaysia  and  throughout Asean.  It  has  also  penetrated  the  Middle  East  too.  In  FY13,  the  local market  made  up  about  78%  of  its  total  revenue  while  the  rest  is  from overseas.  Although  most of  EITA’s  business now is from Malaysia, the group is looking to further expand its regional and international presence going forward.
• NOT  RATED.  We  are  forecasting  EITA  to  achieve  FY14/15/16  net earnings  growth  of  16.5%/9.9%/6.2%  at  a  CAGR  of  5.3%.  Our  FV  of MYR1.51  is pegged to  an 10.5x CY14F  P/E, which is at a 11% discount to its regional peers given  the group’s  relatively smaller earnings base. The stock is NOT RATED.

New Kid On The Block
Background.  EITA’S  history can be traced to 1996  when it was founded as Pacific Astro SB,  with its main business activity being the marketing and distribution of  E&E components  and  equipment.  Subsequently,  the  group  ventured  into  elevator  and busduct manufacturing and services in 2002 and 2008 respectively.

Listing  on  Bursa  Main  Market.  EITA  was  listed  on  the  Main  Market  of  Bursa Malaysia  on  9  April  2012  with  an  initial  market  capitalisation  of  MYR98.8m.  Since then, its market  cap  has  increased by 60%  to MYR157.3m. Management  is led by MD Mr Fu Wing Hoong, who is an engineer by training and a co -founder of EITA. He is  ably  assisted  by  Mr  Lim  Joo  Swee  and  Mr  Chong  Yoke  Peng   –  both  executive directors  and  co-founders  of  the  group.  As  a  whole,  23.7%  of  the  EITA’s shareholdings  are  owned by Ruby Technique SB, which is collectively owned by  QL Resources (QLG MK, BUY, FV: MYR4.90)’s Chia family.

Business  model.  EITA  focuses  on  four  core  operating  segments,  namely:  i) manufacturing of elevators, ii)  manufacturing of  busduct systems,  iii)  marketing and distribution  of  electrical  and  electronic  (E&E)  components  and  equipment,  and  iv) services provider for elevator and security systems solutions.

Elevator manufacturing.  EITA is the only Malaysian company capable of providing the  full  spectrum  of  elevator  services,  ie  design,  manufacturing,  installation  and maintenance.  The  group  counts  its  ability  to  design  and  manufacture  elevators, escalators  and  travellators  among  its  expertise.  As  at  Nov  2013,  it  has  delivered 1,880 units of elevator systems. The group is not only looking to expand its  presence domestically but also regionally  as well,  as  it has also installed elevator systems in Singapore,  Laos,  Vietnam,  Philippines,  Hong  Kong  and  Saudi  Arabia.  In  FY13, elevator manufacturing contributed MYR41.2m to  EITA’s total revenue, of which only 8% (+6%y-o-y) came from the overseas markets. We expect this segment’s topline to grow  5.7%  in  FY14  and  6.1%  for  FY15  on  increased  demand  from  the  local  and regional  construction  industries.  Although  the  group’s  domestic  market  share  is relatively smallish at  10%, we believe EITA’s products  have  more value appeal. W e estimate  that  they  are  priced  at  a  20-35%  discount  to  global  brands  like  Otis Elevators,  Schindler (SCHP SW, NR), Kone (KNEBV FH), and ThyssenKrupp (TKA GR, NR).

Technical  agreement  with  Schneider.  In  2002,  EITA  entered  into  a  technical agreement with Schneider, a German company with world class expertise in elevator systems.  The  latter  assisted  the  former  in  setting  up  its  research  &  development (R&D)  facilities and provided training to the group’s engineers and technicians. This technical  agreement  has  been  fruitful  to  EITA.  The  group  has  now  localised  the technology as well as  the technical knowhow and ability  to service all segments of the  market,  from  standard  to  premium  elevators.  Starting  from  2009,  elevators manufactured by EITA  are marketed under the  EITA-Schneider  name,  as the group hopes to leverage on Schneider’s reputable branding.

Source: RHB