Excerpts from analyst's report
NRA Capital analyst: Liu Jinshu
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| DeClout | |
| Share price: 22.5 c |
Target: 34 c |
Raising expectations for FY16. Our calculations show that DeClout will make about S$59.8m from the IPO of Procurri (of which S$17.7m will be recognized as other comprehensive income) versus our previous estimate of S$48.6m.
As DeClout will retain control of Procurri, the latter will likely not be revalued to fair value on DeClout’s balance sheet. As for operating profit after tax, we revised our FY16 forecast from zero to S$2m, given that 1Q16 is a seasonally weak quarter.
The fresh funds for Procurri and DeClout’s higher stake of 46.53% implies that growth will resume in 2017.
| ♦ Valuation: 34 c per share |
 "DeClout’s share price has risen from S$0.188 to S$0.225 since our last report. The gap between current share price and our valuation of 15x FY18 P/E and 10x FY20 P/E represents the upside from the execution of key future catalysts – positive share price performance by Procurri, earnings growth and its next harvest."-- Liu Jinshu (photo) |
Building modest expectations for dividends. The IPO of Procurri shows that DeClout is able to generate and harvest value with its M&A strategy.
However, DeClout’s hands are tied by the need to reinvest in new businesses and statutory requirements restricting the payment of dividends from capital by both Procurri and DeClout. Hence, we project a token dividend in 2016, followed by a more substantial sum in 2017.
Once we see that the objective is to protect DeClout’s capital base and support growth, we realize that it is actually to the benefit of shareholders for DeClout to defer any large bonus dividend pay outs until higher growth is realized.
Full report here.
