Chan views the group’s ex-cash P/E of 5.2 times and FY2022 return on equity (ROE) of 15.7% as attractive. He has also kept his ‘buy’ call and 48 cents target price on the counter.
In Chan’s opinion, the outlook for Choo Chiang remains positive for the year ahead, driven by strong demand from customers and project sales. Despite raw material price pressures and an inflationary environment, margins have also remained stable.
The group is also shielded from interest-rate hikes as it does not have any interest-bearing debt. A portion of its $23.3 million cash pile is invested in fixed deposits which can provide additional interest income in FY2023.
“A potential divestment of its non-core investment properties can also be reinvested into the higher-yielding distribution business and act as a share price catalyst,” says Chan.
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As at 3.30pm, shares in Choo Chiang are trading flat at 30 cents.
