CEI LIMITED
Broker: CIMB
Call: Buy
Target Price: $1.04
CEI Limited derives approximately 50 per cent of its sales from the medtech/life science sector; its customers' products are used for chromatographs, analysers and atomic absorption. Many of its key customers have been with the company for approximately 10 to 20 years.
CEI's average revenue over financial years 2006-2010 was $85 million. Ten years after listing, its revenue crossed the $100 million mark in 2011, and expanded 9.1 per cent in 2015. Better traction with its customers and the stronger greenback versus the Singdollar also helped revenue growth, as close to 100 per cent of its sales are denominated in US currency.
The key business risk is order push-back by customers due to global economic conditions. The other major risk would be US dollar strengthening versus the Singdollar, Vietnamese dong and Indonesian rupiah. An appreciation of 5 per cent of the greenback against the Singdollar could improve gross profit margin by 0.5 percentage point, assuming CEI Limited gets to retain all the benefits.
YANGZIJIANG SHIPBUILDING
Broker: OCBC Investment Research
Call: Hold
Target Price: 81 cents
In the past few months, Yangzijiang Shipbuilding (YZJ) has been streamlining its business, first disposing of its real estate development assets, next selling its indirect interest in PPL Shipyard, and finally disposing of its entire 20 per cent interest in Jiangsu Hailan Marine Systems Technology, which deals with integrated marine electrical systems. Management had previously mentioned its desire to leave the real estate business after its earlier foray into this area, and it is also no surprise that the group is giving up on rig building for now, given the poor industry outlook and the fact that its only new-build jack-up rig is still idle in the Taicang yard after repeated delivery deferrals.
Meanwhile, ever since our rating downgrade on Aug 8, YZJ's share price has lost about 11.4 per cent of its value versus the Straits Times Index's 2.3 per cent rise.
DEL MONTE PACIFIC
Broker: DBS Group Research
Call: Hold
Target Price: 37 cents
For Del Monte Pacific, the first-quarter results for 2017 were in line with expectations as stronger Asia-Pacific business (US$15 million year-on-year) and stronger sales growth and margins offset higher losses in the Americas of US$9.3 million (S$12.6 million).
The decline in sales in the Americas was largely attributed to reduced sales in non-branded products in private labels, food services and reduction of sales volume. Gross margins were lower due to higher trade promotional spending ahead of Thanksgiving and Christmas.
The first quarter is typically a slow one where production is being ramped up for holiday season sales in the upcoming quarters. Performance of the subsequent quarters would therefore be more reflective of estimated earnings traction for financial year 2017.
Assuming market share reaches a desirable level, less aggressive promotional and marketing activities would essentially improve profitability.
As part of its growth strategy, Del Monte will continue to optimise its cost structure by restructuring and streamlining operations. Growth focus will be on new products, expansion of the S&W brand, and expanding distribution in Asia and the Middle East.
