• High net cash (accounting for 48% of current market cap) raises possible prospect of special dividends in our view.
• Update on revised estimates before release of Lantro’s pending 4Q14 results.
• Revised TP of S$0.700, with implied 7.9x PE FY15F ex cash. Rating revised to “Accumulate”.

What is the news?

Since our initiation in May 2014, Lantro’s share price has rallied about 20% since and had move closer to our target price. We give an update on Lantro before the release of its 4Q14 results and raise the possible prospect of special dividends, in view of its high net cash level, which accounts for 76% of shareholder’s equity as well as 48% of current market cap, and exceptional FY14F performance. We also revisit some of Lantro’s key business strengths and investment merits.

Key Drivers:

 Demand for data centres in Singapore and Asia-Pacific region.  Migration to faster network speed of 1 or 10 Gbps to benefit from nationwide fibre broadband rollouts.  Need from global MNCs for globally standardised hi-quality structured cabling to avoid and quickly deal with critical systems failure.

Investment Action

We revise our 12-month target price of S$0.700 for Lantro, which we derive from our DCF valuation. This implies 7.9x PE FY15F ex cash. With the recent strong rally of ~20% in share price, we revised our rating to “Accumulate”. Expect dividend yield of 3.2%.

Source: Phillip Securities Research - 1 Aug 2014