SINGAPORE (Aug 28): CIMB is maintaining its “add” on CEI, the contract manufacturer of printed circuit boards, after the group expects to remain profitable in FY17.
As at end June, CEI had an order book of $53.1 million which it expects to be fulfilled by end December.
CEI also has minimal capex as the group’s utilisation rate hovered in the 60-65% range, according to management. In 1H17, capex stood at a negligible $275,000.
In a Friday report, William Tng says management does not see full-year capex exceeding $1 million. “Given its limited capex needs, we have raised our dividend payout assumption to 90% from 80% previously. We note that the dividend payout ratio was 97% in 1H17,” says Tng.
An interim DPS of 1.04 cents and a special DPS of 3 cents were declared for 1H17. This means a dividend payout ratio of 97% in 1H17 versus 89% for 1H16.
For FY17F, CIMB is lowering its core EPS by 22.3% as it cuts its revenue forecast and factor in the higher operating expenses.
“Core EPS for FY18-19F falls by ~8% due to our reduced revenue forecasts,” says Tng.
“We also update our valuation basis to 9.74x P/E (10-year average) from 9.2x (9-year average) previously. Potential catalysts are new order wins and a stronger US$. Downside risks are a further slowdown in customer orders and a weaker US$,” adds the analyst.
In 1H17, revenue fell 2.1% y-o-y to $67.5 million while gross profit fell 1.6% y-o-y to $16.1 million. Gross profit margin was 23.9% versus 23.8% in 1H16.
Operating expenses grew 10% y-o-y, leading to a 24% y-o-y decline in operating profit to $4.2 million. Interest expenses fell 72% y-o-y while associates reported a 16% y-o-y improvement in profit. Net profit fell 23% y-o-y to $3.6 million.
At end June, CEI was in a net cash position of $5.8 million versus $9.2 million at end Dec 2016. CEI also pared down its debt position to $2.0 million from $2.5 million.
Shares in CEI are trading 0.5 cent lower at $1.02 as at 10.45am.
