SIGN (7246) : Signature International - Cooking up some good times
Target RM3.12 (Stock Rating: ADD)
Signature’s optimism on its prospects this year amid a slowdown in the property sector was evident during its 1QFY6/15 results briefing. We concur and continue to rate it an Add, potentially catalysed by more major contracts and profit margin expansion. We maintain our EPS forecasts and target price, which is based on 30% discount to its SOP value to reflect its small cap and tight trading liquidity.
What Happened
Today’s 1QFY15 results briefing offered a few positive surprises i) The company is looking to grow its retail division, which currently contributes 30% of group revenue. Signature has set up two new “Signature Lifestyle Gallery” stores and plans to add another three stores soon. To further grow the retail market segment, Signature also plans to add 100 franchisees for its affordable kitchen modular retail brand “Kubiq” by 2018. The company currently has 26 franchisees for “Kubiq”. ii) The new interior-fit out division should be an important division for the company in the near future. This division is bidding for around RM80m jobs, which are not factored into our forecasts. iii) The order book now stands at RM220m and the company is bidding for potentially RM500m new jobs. Its order book could see a major boost if it succeeds in securing any big contracts, i.e. projects worth at least RM200m.
What We Think
Prospects are upbeat for this company even amid the existing soft property market conditions. This is because Signature’s kitchen jobs only start when the main construction work is done, i.e. 2-3 years after property launches. The overall property market peaked in 2013 and Signature is poised to be benefit from this trend as the company has a dominant market share of 60-70% for modular kitchen systems. Signature’s earnings growth is only expected to peak in 2016/2017. We like the company’s venture into the interior fit-out business as it complements its existing business. This division should play a more important role for the company over the next few years.
What You Should Do
Remain invested in the stock. While the overall property sector is seeing signs of a slowdown, Signature’s operations have just started to gain momentum and we believe it is targeting a record year in 2015. Profit margins should expand due to growing economies of scale while the order book could surprise if the company secures some major jobs over the next few quarters.
Source: CIMB Daybreak - 27 November 2014
Target RM3.12 (Stock Rating: ADD)
Signature’s optimism on its prospects this year amid a slowdown in the property sector was evident during its 1QFY6/15 results briefing. We concur and continue to rate it an Add, potentially catalysed by more major contracts and profit margin expansion. We maintain our EPS forecasts and target price, which is based on 30% discount to its SOP value to reflect its small cap and tight trading liquidity.
What Happened
Today’s 1QFY15 results briefing offered a few positive surprises i) The company is looking to grow its retail division, which currently contributes 30% of group revenue. Signature has set up two new “Signature Lifestyle Gallery” stores and plans to add another three stores soon. To further grow the retail market segment, Signature also plans to add 100 franchisees for its affordable kitchen modular retail brand “Kubiq” by 2018. The company currently has 26 franchisees for “Kubiq”. ii) The new interior-fit out division should be an important division for the company in the near future. This division is bidding for around RM80m jobs, which are not factored into our forecasts. iii) The order book now stands at RM220m and the company is bidding for potentially RM500m new jobs. Its order book could see a major boost if it succeeds in securing any big contracts, i.e. projects worth at least RM200m.
What We Think
Prospects are upbeat for this company even amid the existing soft property market conditions. This is because Signature’s kitchen jobs only start when the main construction work is done, i.e. 2-3 years after property launches. The overall property market peaked in 2013 and Signature is poised to be benefit from this trend as the company has a dominant market share of 60-70% for modular kitchen systems. Signature’s earnings growth is only expected to peak in 2016/2017. We like the company’s venture into the interior fit-out business as it complements its existing business. This division should play a more important role for the company over the next few years.
What You Should Do
Remain invested in the stock. While the overall property sector is seeing signs of a slowdown, Signature’s operations have just started to gain momentum and we believe it is targeting a record year in 2015. Profit margins should expand due to growing economies of scale while the order book could surprise if the company secures some major jobs over the next few quarters.
Source: CIMB Daybreak - 27 November 2014
