Stocks In Focus MY (Gas M’sia, IQ Grp Hldgs, Vitrox Corp) – 16/02/15
GASMSIA (5209), IQGROUP (5107), VITROX (0097)
Gas Malaysia’s Dividend Ratio Disappoints: CIMB Research
For the fourth quarter ended 31 December 2014, Gas Malaysia registered a 41.9 percent slump in net profit to RM23.3 million, despite a 29.2 percent expansion in revenue to RM780.5 million that came on the back of higher gas sales volume.
The earnings were affected by a decline in gross profit, underpinned by an increase in gas cost, mainly due to higher liquefied natural gas (LNG) prices. While the firm anticipates the increase in gas volume and number of customers to sustain in FY15, it notes that gas cost is expected to rise under the new tariff setting mechanism mainly due to the higher volume of LNG to be purchased at market price.
In tandem with the weaker earnings, the group’s dividend payout ratio was reduced from 100 percent in FY13 to 69 percent in FY14, equivalent to RM0.09 total dividends per share in FY14. CIMB Research said it was disappointed with the lower payout ratio although it recognised that the move was ensure that there was sufficient cash for the firm.
Significance: Given the weak earnings and uncertain gas cost outlook in FY15, the research house has cut its FY15 to FY16 earnings forecasts by 26 percent to 31 percent and said that its previous optimism over the company’s outlook was unjustified. As such, CIMB Research has issued a ‘Hold’ call on the stock with a target price of RM3.03.
IQ Eyes Middle East Opportunities
IQ Group Holdings, a niche player in sensor-controlled light-emitting diode (LED) lighting, is looking to penetrate the Middle East market over the next 12 months through tie-ins with trade show events.
Meanwhile, the firm is working with a distributor based in Singapore to market the group’s new industrial lighting brand, Lumiqs across Southeast Asia. Group chief executive officer Daniel John Beasly noted that response to Lumiqs products has been tremendous and he expects to see positive revenue contributions within the next three to four years.
While the weakening of the ringgit continues to weigh on local businesses which primarily rely on imports, export-driven companies like IQ Group stand to gain and the firm expects to see improvements in gross profit margin as a result of the weakening ringgit.
Significance: While Beasly commented that it is too early to give an estimate of the Middle East market’s contribution to the group’s revenue, he opines that there are significant opportunities. Additionally, the impending goods and services tax is projected to have muted effects on the group’s earnings as 99 percent of its turnover is from exports, which are exempted from the consumption tax.
Vitrox Expects Double-Digit Percentage Growth In 1Q15 Sales
Vitrox Corporation has orders in hand of RM15 million to RM17 million worth of vision inspection equipment, which would be delivered by March. The company believes that it will register a register a double-digit percentage growth in sales in 1Q15, compared to revenue of RM22.8 million in 1Q14.
The firm shared that it was getting more agents to be based in China, the United States, South Korea and Mexico to expand its customer base, which includes the top multinational corporations and the small and medium players. Currently, the group has about 20 agents to market its products overseas.
On business updates, Vitrox shared that its new 3-D advanced X-ray inspection equipment is scheduled to be released in 2H15. The company is also embarking on an expansion plan in Batu Kawan, where it will invest RM80 million in the first out of three phases of its new plant, which will be operational in early 2017 and will double the production capacity of its present facility.
Significance: In view of the increased in demand for vision inspection equipment for the semiconductor and electronics assembly industry, Vitrox is also aiming for similar growth for 2015. The group will also invest about RM20million this year, compared with over RM15 million last year, for design and development activities to develop new machine vision potential applications for the manufacturing sector.
GASMSIA (5209), IQGROUP (5107), VITROX (0097)
Gas Malaysia’s Dividend Ratio Disappoints: CIMB Research
For the fourth quarter ended 31 December 2014, Gas Malaysia registered a 41.9 percent slump in net profit to RM23.3 million, despite a 29.2 percent expansion in revenue to RM780.5 million that came on the back of higher gas sales volume.
The earnings were affected by a decline in gross profit, underpinned by an increase in gas cost, mainly due to higher liquefied natural gas (LNG) prices. While the firm anticipates the increase in gas volume and number of customers to sustain in FY15, it notes that gas cost is expected to rise under the new tariff setting mechanism mainly due to the higher volume of LNG to be purchased at market price.
In tandem with the weaker earnings, the group’s dividend payout ratio was reduced from 100 percent in FY13 to 69 percent in FY14, equivalent to RM0.09 total dividends per share in FY14. CIMB Research said it was disappointed with the lower payout ratio although it recognised that the move was ensure that there was sufficient cash for the firm.
Significance: Given the weak earnings and uncertain gas cost outlook in FY15, the research house has cut its FY15 to FY16 earnings forecasts by 26 percent to 31 percent and said that its previous optimism over the company’s outlook was unjustified. As such, CIMB Research has issued a ‘Hold’ call on the stock with a target price of RM3.03.
IQ Eyes Middle East Opportunities
IQ Group Holdings, a niche player in sensor-controlled light-emitting diode (LED) lighting, is looking to penetrate the Middle East market over the next 12 months through tie-ins with trade show events.
Meanwhile, the firm is working with a distributor based in Singapore to market the group’s new industrial lighting brand, Lumiqs across Southeast Asia. Group chief executive officer Daniel John Beasly noted that response to Lumiqs products has been tremendous and he expects to see positive revenue contributions within the next three to four years.
While the weakening of the ringgit continues to weigh on local businesses which primarily rely on imports, export-driven companies like IQ Group stand to gain and the firm expects to see improvements in gross profit margin as a result of the weakening ringgit.
Significance: While Beasly commented that it is too early to give an estimate of the Middle East market’s contribution to the group’s revenue, he opines that there are significant opportunities. Additionally, the impending goods and services tax is projected to have muted effects on the group’s earnings as 99 percent of its turnover is from exports, which are exempted from the consumption tax.
Vitrox Expects Double-Digit Percentage Growth In 1Q15 Sales
Vitrox Corporation has orders in hand of RM15 million to RM17 million worth of vision inspection equipment, which would be delivered by March. The company believes that it will register a register a double-digit percentage growth in sales in 1Q15, compared to revenue of RM22.8 million in 1Q14.
The firm shared that it was getting more agents to be based in China, the United States, South Korea and Mexico to expand its customer base, which includes the top multinational corporations and the small and medium players. Currently, the group has about 20 agents to market its products overseas.
On business updates, Vitrox shared that its new 3-D advanced X-ray inspection equipment is scheduled to be released in 2H15. The company is also embarking on an expansion plan in Batu Kawan, where it will invest RM80 million in the first out of three phases of its new plant, which will be operational in early 2017 and will double the production capacity of its present facility.
Significance: In view of the increased in demand for vision inspection equipment for the semiconductor and electronics assembly industry, Vitrox is also aiming for similar growth for 2015. The group will also invest about RM20million this year, compared with over RM15 million last year, for design and development activities to develop new machine vision potential applications for the manufacturing sector.
