Excerpts from latest analyst reports….
CIMB-GK raises Broadway’s target price from $1.67 to $1.86
Analyst: Jonathan Ng
Raising forecasts; maintain Outperform. We have raised our FY10-12 profit forecasts by 8-11% to assume higher sales and margins in view of the strong turnaround of Broadway’s non-HDD component business.
Accordingly, our target price rises from S$1.67 to S$1.86, still applying 8x CY11 P/E (within its 5-year trading band). We see catalysts from:
1) possible upside surprises in earnings; and
2) positive newsflow on the HDD and semiconductor industries.
• Non-HDD components enjoying healthy yoy growth. Although its HDD component business is slightly weak qoq on the back of seasonality, non-HDD component sales continue to grow. Yoy, however, both HDD and non-HDD component sales continue to improve, riding a better macro environment.
• Packaging business still growing, though not as much as expected. This is due to a slight softness in European markets as well as losses incurred for some insulation projects in China. Nevertheless, echoing the component business, this unit’s sales improved over the same period last year.
• Expect mild impact from higher wages in China. Like most manufacturers in China, Broadway will be hit by the rise in China’s minimum wage. However, it stresses that the actual impact will not be as severe as market expectations, with the jump only affecting new hires and lower-level operators.
Recent story: BROADWAY, MAP, etc: HDD recovery to benefit component makers
Kim Eng Securities sees ‘good opportunity to accumulate Design Studio on weakness’
Analyst: Pauline Lee
Design Studio is in a sweet spot to benefit from the strong supply of private residential units and hotel rooms in Singapore.
Positive catalysts will come from strong overseas demand that could be multiple times that in Singapore. With a dividend yield in excess of 5%, PER of just 4x, and solid balance‐sheet strength (net cash of $42m), the stock is an appealing M&A target that offers deep value. View
Our recent discussion with management reaffirmed the positive view we have with regard to Design Studio. Its earnings momentum will accelerate in 2H10, propelled by a fast‐growing orderbook. In addition, robust demand for its high‐quality products in the private residential and hospitality segments should attract more contract wins both in Singapore and overseas in the near term.
Upside earnings surprises appear aplenty given the huge market potential in Asia. We estimate that the supply pipeline for private residential properties and hotels in Singapore alone could contribute at least $100m per annum to the group’s revenue for the next five years.
Strong demand from overseas, which makes up 30% of Design Studio’s orderbook, will further enhance earnings upside.
The stock tumbled some 27% last month when a piece of old news relating to a litigation in Dubai surfaced. Management firmly declared that the alleged claim was without substance and stood ready to defend the case. No contingent liability would be made. We believe that the market has overreacted and see this as a good opportunity to accumulate the stock on weakness. tion & Recommendation
We cut our earnings estimates for FY10 and FY11 by 15.6% and 19%, respectively, to factor in slower‐than‐expected revenue recognition. Our target price thus falls to 90 cents, pegged at 7.5x FY10 PER. Reiterate BUY.
