Steady as she goes
JMG reversed a 1H13 loss of S$1.9m, reporting net profit of S$1.1m in
1H14. This extends its trend of stronger performance since recording a
S$0.5m net profit in FY13 on the back of a recovery in 2H13.
There was 57% yoy growth in 1H14 revenue. This growth took place
across all three business segments of the group. This points to persistent
strength in its recovery. We think the broad-based recovery will continue
as the economic environment improves.
Management has kept a tight lid on costs. Gross profit margin rose to
27% from 24% in 1H13, while distribution and general and administrative
costs rose only 2.8% in spite of the revenue jump.
Net profit was boosted by an absence of other expenses as compared to
a S$0.4m charge in 1H13.
A strong balance sheet remains a key strength for JMG. The group
continues to be cash rich, with net cash of S$14.2m, or 88% of its market
capitalisation. The group remains in a strong position to pay dividends,
and we maintain our forecast of 0.2 Scts DPS for each of FY14-16.
We recommend a BUY, target price S$0.19 based on 0.7x CY14 BVPS
(in line with its historical average P/BV). A share price rerating could come
from a full year of sustained profitability.
