SINGAPORE (Nov 29): Phillip Capital is maintaining its “buy” on Nam Lee Pressed Metal Industries with a higher target price of 56 cents, saying the designer, manufacturer and supplier of metal products is an attractive yield play.
In a Wednesday report, analyst Richard Leow notes that Nam Lee’s FY17 total dividends of 2 cents met expectations, giving it a yield of 5%.
Leow further forecasting 2.5 cents in dividends for FY18 on stable to positive outlook for Nam Lee.
Management has been pretty upbeat in its FY18 outlook compared to previous quarters, saying the recovery of the US economy could have a positive impact on the group’s aluminium production business.
In the recent 3Q17 earnings presentation by New York-listed United Technologies, commercial sales for Transport Refrigeration rose by a high single-digit, an improvement over 2Q and 1Q.
“Domestically, Nam Lee could potentially benefit from the pipeline of infrastructure projects and spate of collective sales. Any revenue recognition though would probably only be at least two years from now, coinciding with the tail-end of the projects,” says Leow.
In FY17, Nam Lee reported 8.2% higher profit of $10.1 million due to lower taxes. As at end Sept, it was also in a net cash position of $40.8 million which makes up 42% of market cap.
This is despite a significant increase in liability under “other creditors and accruals” due to the provision of a one-off replacement of a past building project, as well as a dilution of shares over 4Q after the exercise of employee share options.
As at 12.35pm, shares in Nam Lee are trading at 40 cents or 7.8 times FY18 earnings.
