Affin IB Research maintains Add on Tong Herr, cuts target price

Affin IB Research maintains Add on Tong Herr, cuts target price
Business & Markets 2013
Written by theedgemalaysia.com
Friday, 27 December 2013 08:25

KUALA LUMPUR (Dec 27): Affin IB Research has maintained its Add rating on Tong Herr Resources Bhd at RM1.72 with a lower target price of RM2 (from RM2.25) and said Tong Herr would be one of the key beneficiaries in the research house’s Building Material sector universe, to an anticipated pick up in the global economic outlook.

In a note Friday, the research house said this was because more than 70% of Tong Herr’s revenue are derived from the export markets; mainly to the developed markets.

Affin Research said current utilisation for its fasteners manufacturing plants are only circa 70%, allowing the group sufficent room to cater for any pick up in demand.

It said given the minimal capex over the next couple of years, Tong Herr is able to maintain a payout of 8 sen which translates into a decent yield of 4.7%.

“We have lowered our earnings forecast by 10.5% – 21.6% for FY13-FY15, after updating our FY12 audited earnings figures, as well as imputing a higher effective tax rate assumption of 24% from 20% previously.

“Because of our earnings downgrade, our fair value on Tong Herr is lowered to RM2.00 (from RM2.25 previously) based on an unchanged 10x CY14 PER,” it said.