Local retailer and distributor of electrical products Choo Chiang Holdings 42E is poised to be a beneficiary of the construction recovery and a buoyant resale property market, according to Lim & Tan Securities analyst Chan En Jie in his March 22 report.
This is apparent in the group’s latest FY2022 ended Dec 31, 2022, results, which saw revenue growing by 10.3% y-o-y to $87.6 million, while profits gained 5.3% y-o-y to $9.0 million. Total dividend were at 2.2 cents, higher than 2.0 cents a year ago, representing a favourable 6.6% dividend yield based on the current share price.
Chan views the group’s ex-cash P/E of 5.2 times and FY2022 return on equity (ROE) of 15.7% as attractive. He has also kept his ‘buy’ call and 48 cents target price on the counter.
In Chan’s opinion, the outlook for Choo Chiang remains positive for the year ahead, driven by strong demand from customers and project sales. Despite raw material price pressures and an inflationary environment, margins have also remained stable.
The group is also shielded from interest-rate hikes as it does not have any interest-bearing debt. A portion of its $23.3 million cash pile is invested in fixed deposits which can provide additional interest income in FY2023.
“A potential divestment of its non-core investment properties can also be reinvested into the higher-yielding distribution business and act as a share price catalyst,” says Chan.
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As at 3.30pm, shares in Choo Chiang are trading flat at 30 cents.
