Towards Financial Freedom
XMH - Strong Growth Priced In After Sizzling 160% Run
XMH's FY13 results were in line with forecasts, beating our estimates by just 2%. Looking ahead, organic growth may come from India and Vietnam while the bulk of earnings growth should emanate from an acquisition we expect to materialise within two months. However, after a sizzling 160% share price run-up since we initiated coverage on 28 Nov 2012, we think the growth has largely been priced in, and hence downgrade the stock to NEUTRAL, with a higher TP of SGD0.44.
- Results in line. XMH's FY13 results pipped our estimates by just 2%. FY13 revenue jumped 57% y-o-y due to organic growth and a surge in revenue in 4QFY13. Margins were slightly compressed by its product mix and the effects of a weaker Yen, while overheads expenses rose20% as XMH added more staff. Net profit for the full year grew 20% to SGD11.4m. (please see Figure 1 for details)
- 1.2 cent dividend nearly meets expectations. XMH declared a 1.2 cent dividend (1 cent ordinary, 0.2 cent special) that is 0.2 cent higher yo-y versus our original expectation of 1.3 cents. We expect a payout ratio of about 40% going forward, in line with historical experience
- Already dominant in Indonesia, eyes regional growth. Based on its strong core operations in Indonesia, XMH is looking to expand its sales network to Vietnam and India. The completion of its new facility in FY16 will give XMH the capacity to serve more markets in the region.
- An acquisition likely within 2 months. In tandem with our expectation as stated in our 20 May report, we envisage the company making an acquisition within a three-month call option period. Our figures already include a SGD3m net profit contribution from this acquisition for FY14F-15F to incorporate our growth expectations.
- No longer a value stock after 160% return over 7 months. While XMH's operations remain robust, the stock is now trading at 12.5x FY14F EPS and yield of 3.2%, for a P/BV of nearly 4.0x today. Since we deem its growth expectations largely been priced in, we downgrade the stock to NEUTRAL, with SGD0.44 TP based on 12x FY14F EPS.
Source: OSK
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