Tanjong continues to trade at an attractive 8.6x FY10 PER accompanied by an attractive gross dividend yield of 6.7%. We believe that this should provide some form of trough support to its share price downside while the medium term upside will be driven by the group’s future value accretive power acquisitions. We are maintaining our BUY recommendation and RM18.60 SOP-derived target price. The stock is currently trading below its 5-year historical 12x. On a PBV comparison, it is trading at 1.5x estimated FY10 book value vs its 5-year historical average 1.9x.
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TANJONG plc's (RM14.40) earnings results for the first quarter of its financial year ending January 2010 showed little signs of pressure from the global economic downturn.
The company reported a net profit of RM191.4 million for the three-month period from February to April 2009 — recovering smartly from the immediate preceding quarter in the absence of one-off items.
Tanjong's results underscore the resilience of its key businesses, which we believe will remain steady for the remainder of the financial year, barring unforeseen events or extraordinary charges.
Growth prospects at cheap valuations
We estimate net profit to grow to RM654.5 million in FY10, equivalent to about 162.3 sen per share. This prices its shares at a forward P/E multiple of only 8.8 times - making Tanjong one of the most attractively valued big cap blue-chip stocks on the local bourse.
Shareholders will also earn higher-than-market average yields. We estimate dividends will rise to RM1 per share in the current financial year, on the back of higher earnings. This will translate into gross yield of 7% at the current share price.
Most importantly, we believe that Tanjong remains committed to pursuing a strategy of growth. The company is actively on the lookout for new investing opportunities, particularly within the power generation sector.
It has a strong foothold in developing countries such as Egypt, Bangladesh and Pakistan where power consumption is expected to grow rapidly. Hence, we are sanguine of Tanjong's future growth prospects.
The company reported a net profit of RM191.4 million for the three-month period from February to April 2009 — recovering smartly from the immediate preceding quarter in the absence of one-off items.
Tanjong's results underscore the resilience of its key businesses, which we believe will remain steady for the remainder of the financial year, barring unforeseen events or extraordinary charges.
Growth prospects at cheap valuations
We estimate net profit to grow to RM654.5 million in FY10, equivalent to about 162.3 sen per share. This prices its shares at a forward P/E multiple of only 8.8 times - making Tanjong one of the most attractively valued big cap blue-chip stocks on the local bourse.
Shareholders will also earn higher-than-market average yields. We estimate dividends will rise to RM1 per share in the current financial year, on the back of higher earnings. This will translate into gross yield of 7% at the current share price.
Most importantly, we believe that Tanjong remains committed to pursuing a strategy of growth. The company is actively on the lookout for new investing opportunities, particularly within the power generation sector.
It has a strong foothold in developing countries such as Egypt, Bangladesh and Pakistan where power consumption is expected to grow rapidly. Hence, we are sanguine of Tanjong's future growth prospects.
