• Lantrovision reported gain of 5.8%y-y in 1Q15 revenue at S$37.8m, contributed from more installation projects and trading sales.
• Operating profit up 5.6%y-y at S$3.9m. However, net profit down 1.7%y-y to S$2.7m, due to higher effective tax as a result of book-tax differences.
• Remain positive on Lantro and maintain earnings estimates and target price of S$0.72. Upgrade to “Buy” in view of potential upside at current share price.

What is the news?

Increase in revenue was attributable to more installation projects in Singapore and China. Higher trading sales also contributed to increase in 1Q15 revenue. Despite higher revenue and EBIT, net profit was down 1.7% due to higher effective tax as a result of a downward adjustment in deferred tax assets.

How do we view this?

We continue to be positive in our outlook for Lantro, in view of growing demand trend for data centres and quality structured cabling in Asia-Pacific region while remaining cautious on cost pressure that may arise from a tight labour market. Net cash remains high at S$80m, which came down slightly from previous quarter mainly due to working capital changes.

Investment Action

Share price came down in recent months due to impacts from global sell -off but business fundamentals remained firm in our view. Lantro offers attractive dividend yield of over 5% at current price, assuming DPS of 3 cents is maintained. We continue to hold our earnings estimates and target price of S$0.720. In view of its potential upside from current price, we upgrade our rating to “Buy”.

Source: Phillip Securities Research - 14 Nov 2014