Al Anwar Ceramic
AACT
0.58%
0.17
0.00
AACT
EFG Hermes research unit raised Oman-based Al Anwar Ceramic Tiles fair value by 9% to OMR0.655/share as it revise its estimates to include management’s plan to commercially operate its sixth production line starting 3Q2015, three quarters ahead of previous estimate.
The new FV offers 15% upside potential, hence EFG upgrade its rating to Buy. The stock trades at a 2015e P/E of 12.8x, well below its peers’ average of 15x. Significant delays to the capacity addition plan or weaker-than-estimated utilization rate are key risk factors to EFG'S estimates.
Management has confirmed that the sixth tile line with an annual production capacity of 4 million sqm will be operational by 3Q2015 versus 2Q2016 previously. Hence EFG raises its earnings estimate beyond 2014 by an average of 5.5% ,while lowers 2014 earnings estimate by just 2.2% to OMR8.9 million (+13% Y-o-Y) and expects EBITDA margin to improve by 60bps Y-o-Y to 41.5%. EFG expectS the dividend payout ratio to sustain at 65% in 2014 (OMR.023/share), equating to a yield of 4.1%.
The fifth tile production line with a capacity of 4 million sqm per annum started operation at end-2Q2014 and should have a positive impact on revenue starting in 3Q2014 ,said EFG.
EFG expect AACT to utilize 95% of its combined capacity during 3Q2014 and to report earnings of OMR2.36 million (+15% Y-o-Y and Q-o-Q) over revenue of OMR7.8 million (+20% Y-o-Y). Meanwhile, expects stable gross margin Y-o-Y at 56% but a 130bps decline Q-o-Q to reflect the incremental cost of the new production line. The margin should improve gradually in future quarters as utilization at the new line picks up, noted EFG.
The new FV offers 15% upside potential, hence EFG upgrade its rating to Buy. The stock trades at a 2015e P/E of 12.8x, well below its peers’ average of 15x. Significant delays to the capacity addition plan or weaker-than-estimated utilization rate are key risk factors to EFG'S estimates.
Management has confirmed that the sixth tile line with an annual production capacity of 4 million sqm will be operational by 3Q2015 versus 2Q2016 previously. Hence EFG raises its earnings estimate beyond 2014 by an average of 5.5% ,while lowers 2014 earnings estimate by just 2.2% to OMR8.9 million (+13% Y-o-Y) and expects EBITDA margin to improve by 60bps Y-o-Y to 41.5%. EFG expectS the dividend payout ratio to sustain at 65% in 2014 (OMR.023/share), equating to a yield of 4.1%.
The fifth tile production line with a capacity of 4 million sqm per annum started operation at end-2Q2014 and should have a positive impact on revenue starting in 3Q2014 ,said EFG.
EFG expect AACT to utilize 95% of its combined capacity during 3Q2014 and to report earnings of OMR2.36 million (+15% Y-o-Y and Q-o-Q) over revenue of OMR7.8 million (+20% Y-o-Y). Meanwhile, expects stable gross margin Y-o-Y at 56% but a 130bps decline Q-o-Q to reflect the incremental cost of the new production line. The margin should improve gradually in future quarters as utilization at the new line picks up, noted EFG.
Source:
Mubasher Exclusive