BHIC upgraded to ‘buy’, TP raised after 3Q results

Business & Markets 2013
Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com
Friday, 15 November 2013 11:52
A + A - Reset
KUALA LUMPUR (Nov 15): HongLeong Investment Bank (HLIB) has upgraded
rating for Boustead Heavy Industries Bhd (BHIC) to ‘buy’ and raises the target
price (TP) of the company to RM3.20 following the release of BHIC’s third
quarter results.
Revenue for BHIC in the nine months to Sept 30 (3Q) increased by 36% to
RM207 million from RM153 million in the previous year corresponding period.
HLIB cited the increase in maintenance, repair and overhaul (MRO) jobs and
improved utilization of tankers as the factors for the jump in revenue.
However, the 9MFY13 profit of RM31 million was slightly below the
expectations of the research house due to unrecognized earnings from the
littoral combat ship (LCS) contract.
Regardless, HLIB remains positive on its outlook for the company.
“We are becoming more confident on the company’s execution ability as this is
the third consecutive quarter the company managed to register profits after six
consecutive losses previously,” said HLIB adding that this is an indicator of
recovery for BHIC.
HLIB also said that the LCS contract that is expected to be signed by the end of
2013 will be the main re-rating catalyst for BHIC’s stocks.
HLIB has also raised its forecasts for FY14 and FY15 earnings by 44% to
RM79 million and RM82 million respectively, in light of improving margin
assumptions due to the LCS contract expected in early 2014.
“Once the agreement is signed, the company can start to recognize some works involved in the mobilisation of LCS contract,” said HLIB in
its report.
At 11.27 am, BHIC share rose 4 sen or 1.4% to RM2.81.