ASIAFLE (7129) : Asia File Corporation - Forex blues in Europe
Target RM6.75 (Stock Rating: HOLD)
At 70% annualised FY2015 net profit, 1HFY15 net profit was below our expectations, mainly due to the impact of the weaker euro and pound sterling. In addition, associate contribution was also down. We cut our FY15-17 EPS by 15-18% to account for the weaker euro and lower associate income. With the year-end ahead, we roll forward to CY16 but due to the EPS cut, our target price falls to RM6.75 based on an unchanged 2016 10.8x P/E, a 10% discount to the sector’s 12x target P/E. The 10% discount is to reflect the stock’s tight liquidity. We prefer QL Resources for exposure in the consumer sector. Hold maintained.
1HFY15 net profit down 16%
1HFY15’s revenue was up 18% yoy as the company secured new markets in Europe. However, 1H’s net profit was down 16% yoy mainly due to the impact of the weaker euro and pound sterling in the past six months, and lower associate contributions from Europe that make up around 65% of the group’s turnover. Excluding the forex impact, we estimate 1HFY15’s net profit to be 10- 12% higher. No interim dividend was declared, in-line with our expectations.
Europe remains main market
Europe remains Asia File’s largest market. In the past one year, the company has consolidated its European operations after acquiring machinery from two stationery companies in France and the Czech Republic. These two stationery companies have since outsourced their sales needs to a more cost-competitive Asia File and this should help the company grow its markets in other parts of Europe. Asia File has no plans to expand its Malaysia operations as it already dominates the market with its 60% share of the domestic filing market.
Cash rich balance sheet, bonus issue should help improve trading liquidity
Asia File’s balance sheet remains strong, with its RM72m net cash, or RM0.64 net cash/share as at end-Sep. The company’s proposed 3:5 bonus issue (i.e. 3 new shares for every five existing shares) should help improve the stock’s trading liquidity. The stock’s free float is currently tight. This corporate exercise should be completed in 1QCY15.
Source: CIMB Daybreak - 01 December 2014
Target RM6.75 (Stock Rating: HOLD)
At 70% annualised FY2015 net profit, 1HFY15 net profit was below our expectations, mainly due to the impact of the weaker euro and pound sterling. In addition, associate contribution was also down. We cut our FY15-17 EPS by 15-18% to account for the weaker euro and lower associate income. With the year-end ahead, we roll forward to CY16 but due to the EPS cut, our target price falls to RM6.75 based on an unchanged 2016 10.8x P/E, a 10% discount to the sector’s 12x target P/E. The 10% discount is to reflect the stock’s tight liquidity. We prefer QL Resources for exposure in the consumer sector. Hold maintained.
1HFY15 net profit down 16%
1HFY15’s revenue was up 18% yoy as the company secured new markets in Europe. However, 1H’s net profit was down 16% yoy mainly due to the impact of the weaker euro and pound sterling in the past six months, and lower associate contributions from Europe that make up around 65% of the group’s turnover. Excluding the forex impact, we estimate 1HFY15’s net profit to be 10- 12% higher. No interim dividend was declared, in-line with our expectations.
Europe remains main market
Europe remains Asia File’s largest market. In the past one year, the company has consolidated its European operations after acquiring machinery from two stationery companies in France and the Czech Republic. These two stationery companies have since outsourced their sales needs to a more cost-competitive Asia File and this should help the company grow its markets in other parts of Europe. Asia File has no plans to expand its Malaysia operations as it already dominates the market with its 60% share of the domestic filing market.
Cash rich balance sheet, bonus issue should help improve trading liquidity
Asia File’s balance sheet remains strong, with its RM72m net cash, or RM0.64 net cash/share as at end-Sep. The company’s proposed 3:5 bonus issue (i.e. 3 new shares for every five existing shares) should help improve the stock’s trading liquidity. The stock’s free float is currently tight. This corporate exercise should be completed in 1QCY15.
Source: CIMB Daybreak - 01 December 2014
