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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