Brokers’ take, Latest Business News - The New Paper

Brokers’ take

This article is more than 12 months old

Compiled by Navin Sregantan


SEPT 16 CLOSE: $0.225

UOB Kay Hian, Sept 16

In July, Fu Yu started voluntary liquidation of 40 per cent-owned Berry Plastics in Malaysia.

We expect the process to be completed by year-end and the earnings drag from the joint venture should drop from a $800,000 loss last year to $500,000 loss this year and to zero in 2020.

Fu Yu will be renewing its leases for 7 and 9 Tuas Drive 1 for another 20 years from 2021. It will sell 5 Tuas Drive 1 by 2020 to comply with the lease renewal term.

Last month, Fu Yu received an early termination of lease for its Shanghai factory. As a result, Fu Yu made a strategic decision to shift operations in Shanghai to its Suzhou factory which has a larger production capacity and is ideally located to serve its customers in Shanghai.

The medium-term benefits include lower overheads and better utilisation at its Suzhou factory. Fu Yu estimates the one-time expense for the Shanghai plant closure at $5.5 million and this could drag Q3 2019 net profit into a loss.

However, we think share price could be supported by a higher dividend of 1.7 cents for this year (last year: 1.6 cents), which will not be cut due to the one-off expense.

Share price catalysts include a higher-than-expected net profit and dividend, a potential takeover offer and potential corporate actions to unlock values, such as disposal of properties.


SEPT 16 CLOSE: $1.19

Maybank Kim Eng, Sept 16

As a result of stronger than expected momentum, AEM has raised FY2019 revenue guidance for the third time this year.

In response, we raise forecast FY2019 earnings by 10 per cent to $285 to $305 million from $265 to $280 million.

We believe our new revenue estimate is conservative as AEM has received $280 million of orders in the year to date to be fulfilled by the end of the year.

The increase in guidance is driven by stronger-than- expected order momentum of HDMT and STHI test handlers, due to the rising significance of system level test at the customer.

Although FY2020-2021 earnings are largely unchanged, we continue to see upside from new projects. FY2020 guidance, when released in January-February next year, should give us a stronger basis to forecast contributions from the hybrid project and Huawei.

A key risk to our forecasts is if there is a sharp demand drop for the customer's chips, as this could create slack capacity and delayed orders.

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