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WIIK & HOEGLUND PLC.
KWH <Bt2.46>
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Recommendation
New : HOLD
Previous : TAKE
PROFIT
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KWH continues to disappoint with lower 4Q02
earnings
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Wiik & Hoeglund Plc (KWH) posted rather disappointing
4Q02 earnings of only Bt14.9mn (EPS of Bt0.1), down 37% qoq.
For full-year 2002, KWH posted a net profit figure of only
Bt54.7mn (EPS of Bt0.25), a 20.6% decrease from the previous
year. This was due to a still sluggish domestic market for
plastic pipes and relatively low level of government
infrastructure spending in the quarter.
At this point, we don't expect to see a significant
improvement in KWH's 2003 earnings given the company's
current backlogue. At the end of December, the backlogue of
orders stood at only Bt188mn, low compared to previous
quarters. Meanwhile, we don't see any signs of progress on
some of the major projects that KWH has a good chance of
winning, including a Bt500-600mn water pipeline system to
three of Thailand’s most popular tourism islands – Samui,
Samet and Chang – and a Bt700-800mn provincial drainage and
sewage pipe contract.
KWH's share price has fallen to only Bt2.46, below our
DCF fair value estimate of Bt2.7. KWH's shares are trading
not expensive on a 2003 PER of 10.6x, EV/EBITDA of 6.6 and
P/BV of 1.37x. KWH also has a strong financial position with
low debt-to-equity ratio of only 0.26x. Even though we are
not optimistic on near-term earnings performance, the
current low price prompts us to upgrade our rating to "HOLD"
from "TAKE PROFIT."
KWH's income statement (Mn Bt)
|
|
4Q02 |
3Q02 |
QoQ |
4Q01 |
YoY |
2002F |
2001 |
YoY |
|
Sales |
144.5 |
187.4 |
-22.9% |
171.7 |
-15.8% |
644.9 |
655.1 |
-1.6% |
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Other Income |
0.6 |
1.5 |
-57.4% |
2.4 |
-73.7% |
4.9 |
8.2 |
-40.3% |
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COGs |
103.7 |
131.7 |
-21.3% |
131.7 |
-21.3% |
476.2 |
494.5 |
-3.7% |
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Depreciation&amortisation |
8.7 |
8.6 |
2.0% |
7.6 |
14.4% |
33.6 |
28.6 |
17.7% |
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Gross profits |
32.1 |
47.2 |
-31.9% |
32.4 |
-0.8% |
135.1 |
132.1 |
2.3% |
|
Gross margin (%) |
22.2% |
25.2% |
- |
18.9% |
- |
20.9% |
20.2% |
- |
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SG&A |
17.2 |
23.8 |
-27.7% |
23.1 |
-25.7% |
78.3 |
67.1 |
16.8% |
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EBITDA |
24.0 |
33.2 |
-27.6% |
19.0 |
26.5% |
94.3 |
100.8 |
-6.5% |
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EBITDA margin (%) |
16.6% |
17.7% |
- |
11.1% |
- |
14.6% |
15.4% |
- |
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Interest expense |
0.8 |
0.9 |
-11.7% |
0.1 |
732.1% |
2.4 |
2.2 |
6.0% |
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Net profit before extra item |
14.4 |
22.6 |
-36.2% |
11.3 |
27.5% |
55.3 |
69.6 |
-20.6% |
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Extra ordinary gain (loss) |
0.5 |
1.0 |
-54.6% |
(0.5) |
N.A. |
(0.6) |
(0.7) |
NA |
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Net profit |
14.9 |
23.6 |
-37.0% |
10.8 |
37.1% |
54.7 |
68.9 |
-20.6% |
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EPS (Bt) before extra item |
0.10 |
0.15 |
-36.2% |
0.08 |
27.5% |
0.35 |
0.46 |
-23.6% |
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EPS (Bt) |
0.10 |
0.16 |
-37.0% |
0.07 |
37.1% |
0.35 |
0.46 |
-23.7% |
Note: COGs does not include Depreciation and Amortisation
- KWH's 4Q02 sales came in at only Bt144.5mn, down 15.8%
qoq and 22.9% yoy. This was due to the still sluggish
domestic plastic pipe market and relatively slow government
infrastructure spending during the quarter. For the export
market, the company was able to book 33% of its Bt55mn
project in Vietnam due to the increase in the size and
quantity of pipe.
There are some signs of improving export market in the
Asia Pacific region this year, including three medium-sized
projects: 1) a Bt57mn Coloane power plant project in Macao,
2) a Bt55mn World Bank-funded water and sewage project in
Danang, Vietnam (booked 33%) and 3) a Bt99mn Kolkata
Municipal water supply project in India (booked 40%).
The company's order on hand at the end of December stood
at Bt188.35mn, the lowest level compared to previous
quarters. We are, therefore, lowering our 2003 sales
projection from Bt788mn to Bt696mn. Until we see signs of
progress on the three resort island project or the
provincial drainage and sewage pipe contract, we will not
factor the sales into our forecasts.
KWH's SALE AND BACKLOG OF ORDER (Bt,Mn)
| |
2Q01 |
3Q01 |
4Q01 |
1Q02 |
2Q02 |
3Q02 |
4Q02 |
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Net Sales |
145.1 |
193.3 |
168.6 |
144.5 |
159.2 |
183.7 |
141.6 |
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Pipes Installation And Welding Services |
4.9 |
3.7 |
3.1 |
3.6 |
5.7 |
3.6 |
2.9 |
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Total Sales |
150.0 |
197.0 |
171.7 |
148.2 |
164.9 |
187.4 |
144.5 |
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Backlog Of Order (End of
Quarter) |
243.6 |
251.6 |
148.9 |
170.2 |
277.1 |
195.5 |
188.4 |
KWH's 4Q02 gross profit fell to 22.2% from 25.2% in the
previous quarter, but was still higher than the 18.9% margin
in the previous year. According to the management, the
higher margin was due to the profitable Kolkata Municipal
water supply project and lower raw material costs compared
to last year.
On the positive side, KWH's selling and administrative
expenses decreased 27.7% qoq to Bt17.2mn, roughly in line
with lower sales volume.
Another positive is the company's relatively strong
financial position with a year-end debt/equity ratio of only
0.26x.
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Income Statement |
1999 |
2000 |
2001 |
2002 |
2003F |
2004F |
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Sales |
663 |
700 |
655 |
645 |
696 |
766 |
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Other income |
10 |
5 |
8 |
5 |
5 |
5 |
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Total revenues |
673 |
705 |
663 |
650 |
701 |
771 |
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Cost of Goods sold |
417 |
511 |
494 |
476 |
512 |
564 |
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Depreciation and Amortisation |
27 |
29 |
29 |
34 |
31 |
32 |
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SG&A and Others Expenses |
101 |
75 |
68 |
79 |
85 |
94 |
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EBIT |
127 |
91 |
72 |
61 |
73 |
81 |
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Interest expenses |
8 |
4 |
2 |
2 |
3 |
3 |
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Net profit before extra item |
117 |
85 |
70 |
55 |
69 |
75 |
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Equity Acc. + Extraordinary Gains |
2 |
7 |
(1) |
(1) |
- |
- |
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Net profit |
120 |
92 |
69 |
55 |
69 |
75 |
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EPS |
0.80 |
0.61 |
0.46 |
0.35 |
0.23 |
0.25 |
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EPS Growth |
37.4% |
( 23.7%) |
( 24.7%) |
( 23.7%) |
( 34.4%) |
8.8% |
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PER |
3.08 |
4.03 |
5.35 |
7.01 |
10.68 |
9.81 |
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EV/EBITDA |
2.25 |
3.67 |
3.00 |
5.32 |
6.68 |
7.55 |
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P/BV |
0.75 |
0.72 |
0.71 |
0.76 |
1.37 |
1.29 |
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Dividend / Share |
0.48 |
0.43 |
0.35 |
1.17 |
0.14 |
0.15 |
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Debt / Equity |
0.03 |
0.21 |
0.00 |
0.26 |
0.00 |
0.25 |
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No. of Shares |
150.00 |
150.00 |
150.00 |
156.00 |
300.00 |
300.00 |
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Analyst: Surachai Pramualcharoenkit
(Ext. 1420)
Email: Surachai.p@kimeng.co.th
If you have
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Copyright © March 2000,
Kim Eng Securities (Thailand) PLC. All rights reserved.
Disclaimer
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