SINGAPORE (June 27): RHB is maintaining its “buy” call on Jadason Enterprises with a target price of 15 cents on expectations of strong growth in its manufacturing and support services segment in 2H17 due to a new mobile product.
To recap, Jadason is likely to secure a new project for a new mobile product involving a “world-renowned major player from the US”, which will start in July.
(See also: RHB starts coverage of Jadason with high hopes)
The group also reported earnings of $280,000 for the first quarter ended March, a 7% increase from $261,000 a year ago.
(See also: Jadason on track for ‘explosive growth’)
In a Tuesday report, analyst Jarick Seet notes that Jadason is currently upgrading its machines to facilitate the production ramp-up in 2H17.
“With more holes (average of 80,000) needed to be drilled for the printed circuit board (PCB) of this new product, vs its current portfolio of products, we expect margins for this new project to be more lucrative,” says Seet.
Seet also expects a 20-30% pa increase in the company’s drilling segment revenue over the next two to three years. This is expected to increase Jadason’s net profit after taxes significantly in FY17-18F.
Although the company saw a loss of $1.2 million in 2Q16, Seet expects that the utilisation rate of its machines will show a turnaround and boast a stronger quarter in 2Q17 compared to 1Q17.
“Jadason's CEO Mr Fung Chi Wai last bought back shares in May this year, which we view as a vote of confidence on its outlook. Before the share buyback, Mr Fung bought back shares twice in Jan 2017,” says Seet.
Shareholders are likely to receive dividends this year if it performs well, says Jadason’s management.
Seet expects that the company will potentially distribute an “attractive” dividend yield of 8.8% in FY17F as it continues to generate positive cash flow due to low capex requirements.
At 10.43am, shares of Jadason are trading 0.1 cent higher at 8.9 cents.
