CEI also has minimal capex as the group’s utilisation rate hovered in the 60-65% range, according to management. In 1H17, capex stood at a negligible $275,000.
In a Friday report, William Tng says management does not see full-year capex exceeding $1 million. “Given its limited capex needs, we have raised our dividend payout assumption to 90% from 80% previously. We note that the dividend payout ratio was 97% in 1H17,” says Tng.
An interim DPS of 1.04 cents and a special DPS of 3 cents were declared for 1H17. This means a dividend payout ratio of 97% in 1H17 versus 89% for 1H16.
For FY17F, CIMB is lowering its core EPS by 22.3% as it cuts its revenue forecast and factor in the higher operating expenses.
“Core EPS for FY18-19F falls by ~8% due to our reduced revenue forecasts,” says Tng.
“We also update our valuation basis to 9.74x P/E (10-year average) from 9.2x (9-year average) previously. Potential catalysts are new order wins and a stronger US$. Downside risks are a further slowdown in customer orders and a weaker US$,” adds the analyst.
In 1H17, revenue fell 2.1% y-o-y to $67.5 million while gross profit fell 1.6% y-o-y to $16.1 million. Gross profit margin was 23.9% versus 23.8% in 1H16.
Operating expenses grew 10% y-o-y, leading to a 24% y-o-y decline in operating profit to $4.2 million. Interest expenses fell 72% y-o-y while associates reported a 16% y-o-y improvement in profit. Net profit fell 23% y-o-y to $3.6 million.
At end June, CEI was in a net cash position of $5.8 million versus $9.2 million at end Dec 2016. CEI also pared down its debt position to $2.0 million from $2.5 million.
Shares in CEI are trading 0.5 cent lower at $1.02 as at 10.45am.
