Towards Financial Freedom
MTQ - Revising Too-Conservative Estimates Post Roadshow
We hosted MTQ on a post-results roadshow yesterday, and came away with a strong sense that we had been too conservative on current-year estimates. We raise FY14F/15F estimates by 5%/5.3% and our TP is adjusted to SGD2.20 at the same 8x FY14F EPS multiple.
- Bahrain likely already at cash breakeven. The large ramp-up in revenues from SGD1.1m in FY12 to SGD4.8m in FY13 indicates that Bahrain is currently operating at SGD0.5m per month. This translates into SGD6m a year, which we have estimated as the cash breakeven point. We now believe that FY14F results should show Bahrain being cashpositive, with a healthy chance of hitting accounting breakeven.
- Our net margin assumption for Neptune Marine Services (NMS) was too low. 4QFY13 results of SGD5.6m pretax profits from NMS included a c.SGD1.5m expense related to the General Offer on the ASX for NMS shares. Without this expense, NMS achieved a 12% core net margin for 4QFY13 on an exceptionally-strong quarter. Management hinted that the 9.5% realised margin might be sustainable over the full year, which is significantly higher than our implied 7% net margin. Erring on the side of caution, we raise our net margin assumption to 8% while keeping the revenue assumption at SGD120m, which is at the low end of the SGD120m-150m we believe NMS can achieve.
- Scrip dividend likely to enjoy 10% discount. Management has indicated that MTQ is likely to continue its previous action of offering scrip dividends at the maximum 10% discount to 5-day average price before ex-dividend date. Even after the recent run-up, we still recommend taking scrip as the price remains well below our conservatively-pegged TP.
- Raised estimates nudge TP up to SGD2.20 from SGD2.10. We think MTQ is a deep-value play: i) 5.5x FY14F EPS and 4.8x FY15F EPS, ii)
3.2x FY14F EV/EBITDA, iii) 1.07x FY14F P/B versus 21% ROE. With all its operational segments profitable and a 28% earnings growth in FY14F, MTQ remains one of our top picks in the small-/mid-cap oil & gas sector.
Source: OSK
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