Towards Financial Freedom
XMH Holdings - Engine Keeps Chugging Along
XMH's 3QFY12 results showed a continuation of strong operations with the top line building up to a record year, having already exceeded FY12's entire top line. The bottom line is down 40% y-o-y, however, due to a one-off SGD1.9m gain in 3QFY12 which more than doubled profits last year. We are maintaining forecasts for a 18% EPS growth this year, and keep our BUY call with a TP of SGD0.35.
Revenue up 35%, gross profit up 22%. 3QFY12 revenue was up a third to SGD19.3m, but the 40% cost growth outpaced revenues leading to a 24.4% margin compared to 27.0% last year. Core operations are chugging along with 9MFY13 revenue and gross profit exceeding the FY12 full-year figures.
Relatively large one-off in previous quarter. Core growth of 26%. Last year, due to forfeiture of customer deposits, XMH recognised a one-off SGD1.9m gain which more than doubled the SGD1.7m core. Without the exceptional gain, 3QFY13 profit stands 26% higher.
Cash of SGD51m is half the market cap. Strong cash generation supports SGD0.45 DCF value. In 9MFY13, XMH generated SGD15.7m in
operating cash flows, which exceeds our PATMI forecast of SGD11.1m, representing some withdrawal of working capital. Still, the strong cash
generation demonstrated supports our DCF valuation of SGD0.45 per share, which we believe is the long-run fair value for this stock. (See Figure 2)
Surprise! Share buyback at SGD0.25. Yesterday, XMH bought back its shares at SGD0.250 to SGD0.255. This demonstrates mgmt's confidence in the value of the company, and at a 45% discount to our conservative DCF-value we think that the current price offers an extremely attractive entry point.
Maintain BUY with TP of SGD0.35. We continue to like XMH for its strong sustainable cash generation (>10% of market cap, from its unique negative cash conversion cycle), exposure to booming Indonesia, attractive valuations, 5.2% yield, and clear growth plans. M&A activity will provide catalysts over the near term. Our TP of SGD0.35 is based on 8x FY13F EPS plus net cash.
Source: OSK
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