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Fitters latest results:
Latest Rolling 4 Quarter/Segment# Results
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This is 2007 report:
Weaker y-o-y. YTD 2Q revenue declined 5.5% on a y-o-y basis form RM65.9m to
RM62.2m. At the PBT and net income level, YTD figures experienced a 50.5% and 40.2%
y-o-y drop. We however note that a portion of this large percentage drop is attributed to
the (unusually) higher figures in FY06 due to the gain on disposal of property and
insurance claims. Initial set up costs incurred by its new galvanizing plant also contributed
towards the lower net income.
Manufacturing segment growth. Fitters is currently in the midst of doubling its raised
floor system capacity from 300 to 600 containers p.a. We understand that operations from
the new line will commence by 4Q07. Expected marginal growth in its fire resistant doors
and fire extinguishers to further support revenue contribution from this segment.
Expansion: Galvanizing services. We now include the contribution from its galvanizing
services into our estimates. Our forecasts indicate that this business could contribute
RM12m and RM27m to FY07 and FY08 revenue. Management has guided us that current
capacity utilization stands at 80% and should hit full utilization by 4Q07.
Theme parks to further spur growth. Fitters recently ventured into the construction of
theme parks in the Middle East via a JV with Zoid S/B. We understand that current jobs at
hand for this division stand at RM55m. With the company bidding for the construction of
more theme parks in the Middle East, management expects to secure another RM150m
worth of projects by the end of 2007.
Still flaming on - BUY. Although its 1H07 results may appear short of our forecast, we
expect this to be reversed in the second half due to contributions from its galvanizing
services and (potential) new theme park projects. We forecast an EPS of 5.46 sen and
8.45 sen for FY07 and FY08 respectively. Tagging FY08 EPS on its historical average
PER of 9.9x, we derive a target price of RM0.835. Given the 13.8% upside, we maintain
our BUY call on Fitters.