Towards Financial Freedom
TECHNICS OIL & GAS - Results above expectations; maintain BUY
Stronger earnings driven by higher margins and gain on disposal of vessel. 3QFY12 net profit rose +1% YoY, +24% QoQ to S$7.5m. 9MFY12 net profit of S$17.8m (+11% YoY) was above our expectation and accounted for 86% of our estimates. The strong results were driven by stronger gross profit margin of 47.6% and S$1.78m gain from disposal of vessel. Excluding the disposal gain, recurring earnings still made up 78% of our estimate. Management also declared an interim dividend of 8.0S'',in-line with expectations. This translates into a net yield of 7.9%. As revenue and margins can be lumpy, we keep our earnings estimates unchanged.Maintain BUY with a TP of S$1.28 pegged to 12x blended FY12/13F EPS. We see re-rating catalysts from positive earnings momentum, new order wins, and listing of its subsidiary, Norr Offshore Group, in 1H2013.
Higher contribution from EPCC projects lifted margins. 3QFY12 revenue fell 14% YoY to S$39.5m. We believe this could be attributed to timing of revenue recognition. 9MFY12 revenue is up +21% YoY. 3QFY12 gross profit margins improved to 48% (3QFY11: 37%) due to higher mix of revenue from EPCC projects (higher margins than Contract Engineering). As of 18 Jul 2012, Technics has a backlog order book of S$85m, with deliveries extending up to 1HFY13. Unlike the order book for rig builders, Technics' order book has much shorter delivery timeline and the low book-to-bill ratio should not be taken negatively. Project duration ranges between two weeks to 18 months.
Valuation: Maintain BUY with an unchanged TP of S$1.28. We value the stock based on 12x P/E on blended FY12/13F EPS, at the top of its historical range. The stock is now trading at 10.2x FY12F P/E and 9.0x FY13F P/E. Since our initiation report on 2 Jul 2012, the stock has appreciated 9% but we see more upside. Our TP implies 26% upside from its last closing price.
Source: OSK
Higher contribution from EPCC projects lifted margins. 3QFY12 revenue fell 14% YoY to S$39.5m. We believe this could be attributed to timing of revenue recognition. 9MFY12 revenue is up +21% YoY. 3QFY12 gross profit margins improved to 48% (3QFY11: 37%) due to higher mix of revenue from EPCC projects (higher margins than Contract Engineering). As of 18 Jul 2012, Technics has a backlog order book of S$85m, with deliveries extending up to 1HFY13. Unlike the order book for rig builders, Technics' order book has much shorter delivery timeline and the low book-to-bill ratio should not be taken negatively. Project duration ranges between two weeks to 18 months.
Valuation: Maintain BUY with an unchanged TP of S$1.28. We value the stock based on 12x P/E on blended FY12/13F EPS, at the top of its historical range. The stock is now trading at 10.2x FY12F P/E and 9.0x FY13F P/E. Since our initiation report on 2 Jul 2012, the stock has appreciated 9% but we see more upside. Our TP implies 26% upside from its last closing price.
Source: OSK
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
