ITD's 4Q02 net profit of
Bt270mn was much better than our forecast of Bt7mn due to
higher-than-expected sales and wider margins. As a result,
we have revised up our 2003 earnings forecast by 5.5% to
Bt696mn and lifted our 2004 estimate by 6.8% to Bt952mn.
We have also upgraded our
recommendation from SELL to HOLD given that ITD is
now trading 8% below our fair value estimate of Bt19.
Despite our upgrade, we remain cautious about ITD's 1H03
earnings prospects given the potential for a slowdown in
large construction contracts. We also remain concerned about
the possibility of further delays in the New Bangkok
International Airport project in which ITD has secured
contracts worth Bt14bn, representing 40% of its current
backlog..
After falling
more than 50% from its 2002 peak of Bt38.25 last June, ITD
is trading on an inexpensive 2003 PER of below 8x. ITD's
financial position remains healthy given its gearing ratio
of 0.73x at end-2002. Also, the company is holding Bt3.3bn
in cash reserves, which gives it a high degree of
flexibility when bidding for contracts.
Table
1: ITD's earnings forecasts
|
Year to Dec |
2001 |
2002F |
2003F |
2004F |
2005F |
|
Sales (Btmn) |
17,936 |
21,034 |
18,859 |
21,818 |
22,987 |
|
Net profits (Btmn) |
(2,528) |
6,336 |
696 |
952 |
1,111 |
|
EPS (Bt) |
(9.22) |
23.10 |
2.10 |
2.87 |
3.35 |
|
Growth (%) |
36% |
351% |
(91%) |
37% |
17% |
|
Cash per share (Bt) |
1.5 |
6.1 |
6.6 |
7.8 |
8.5 |
|
PER (X) |
- |
0.8 |
8.3 |
6.1 |
5.2 |
|
BPS (Bt) |
(3.1) |
34.1 |
29.0 |
31.9 |
34.9 |
|
EV/EBITDA (x) |
8.4 |
3.6 |
3.6 |
3.4 |
3.2 |
|
Dividend Yield (%) |
0% |
0% |
2% |
2% |
4% |
Net profit
rebounds to Bt270mn in 4Q02
ITD's 4Q02 net profit of
Bt270mn was much better than our forecast of Bt7mn due to
higher-than-expected sales and wider margins. Despite its
shrinking backlog of work, ITD booked Bt5.5bn in sales while
unbilled revenues rose from Bt2.3bn in 3Q02 to Bt3.2bn.
Major revenue contributions came from the Taiwan high-speed
railway and track doubling projects. Gross margins widened
to 10.7% versus 6.5% the previous quarter as most of its
sales came from projects with above-average margins.
Table 2:
Quarterly income statement
|
|
4Q02 |
4Q01 |
%
Chg |
3Q02 |
%
Chg |
2002 |
2001 |
%
Chg |
|
Sales |
5,519 |
5,720 |
(3.5%) |
4,719 |
17.0% |
21,034 |
17,936 |
17.3% |
|
COGs |
4,927 |
5,073 |
(2.9%) |
4,414 |
11.6% |
18,861 |
16,424 |
14.8% |
|
Gross profits |
592 |
647 |
(8.4%) |
305 |
94.1% |
2,173 |
1,512 |
43.7% |
|
SG& A |
151 |
461 |
(67.2%) |
265 |
(42.9%) |
855 |
1,280 |
(33.2%) |
|
Operating
profits |
441 |
186 |
137.5% |
40 |
991.1% |
1,318 |
232 |
467.6% |
|
Interest expenses |
62 |
180 |
(65.8%) |
51 |
20.7% |
647 |
1,225 |
(47.2%) |
|
Non-operating income |
97 |
103 |
(5.7%) |
126 |
(23.0%) |
397 |
498 |
(20.3%) |
|
Pre-tax income |
538 |
288 |
86.6% |
166 |
223.9% |
1,068 |
(495) |
315.7% |
|
Extra items |
(45) |
(85) |
46.8% |
(92) |
50.9% |
5,514 |
(1,770) |
411.6% |
|
Normalized profits |
315 |
(79) |
499.5% |
87 |
260.5% |
822 |
(758) |
208.4% |
|
Net
profits |
270 |
(163) |
264.9% |
(5) |
6021.9% |
6,336 |
(2,528) |
350.6% |
|
EPS |
0.7 |
(0.7) |
210.3% |
(0.0) |
6021.9% |
16.9 |
(10.1) |
267.6% |
|
Gross
margins (%) |
10.7 |
11.3 |
|
6.5 |
|
10.3 |
8.4 |
|
|
Operating
margins (%) |
8.0 |
3.2 |
|
0.9 |
|
6.3 |
1.3 |
|
Surprisingly, overheads fell
from an average of Bt235mn a quarter in 9M02 or 4.5% of
sales to Bt151mn or 2.7 % in the final quarter. We expect
the SG&A costs to sales ratio to rise from 4.1% last
year to 6% in 2003 due to a 10% drop in revenue and the
start-up of new projects. We now expect gross margins to
average 10.4% this year against our previous estimate of
10.7% due to higher raw material costs.
Finances in
solid shape after debt restructuring
Interest expenses climbed 21%
qoq as ITD's borrowing rose by about Bt2bn in 4Q02. For the
full year, however, interest costs plunged 47% to Bt647mn
following the company's successful debt restructuring. ITD's
financial position remains healthy given its gearing ratio
of 0.73x at end-2002. Also, the company is holding Bt3.3bn
in cash reserves, which gives it a high degree of
flexibility when bidding for contracts.
Table 3:
Financial ratios
|
|
Q4/01 |
Q1/02 |
Q2/02 |
Q3/02 |
Q4/02 |
|
Gearing |
(14.92) |
(31.82) |
0.53 |
0.54 |
0.73 |
|
Interest Cover |
1.0 |
1.4 |
1.7 |
0.8 |
7.1 |
|
Inventory Days |
30 |
34 |
45 |
46 |
62 |
|
Collection Days |
82 |
89 |
83 |
92 |
69 |
|
Payment Days |
110 |
97 |
91 |
109 |
103 |
|
Net debt (Btmn) |
8,171 |
6,959 |
201 |
1,276 |
3,550 |
|
Working capital (Btmn) |
468 |
1,713 |
2,510 |
2,095 |
1,838 |
Delays in
airport project and slow progress on bidding remain concerns
The company last year booked
revenues of Bt692mn for work on the New Bangkok International
Airport (NBIA), falling well short of earlier estimates of
Bt1.8bn. The airport work is unlikely to begin for at least
another 3-6 months due to bureaucratic delays and a dispute
over the blueprints. This will have a major impact on revenue
recognition given that the airport accounts for about 40% of
ITD's total backlog. ITD is making little headway in securing
other major projects although it is expected to win a Bt1bn
project for Gili Gill Resorts in the Maldives after submitting
the lowest bid.
Figure
1: ITDs' backlogs breakdown
Earnings
forecast revised up 6-7% in 2003-2004
Following its
better-than-expected results, we have revised up our 2003
earnings forecast by 5.5% to Bt696mn. We have also lifted our
2004 estimate by 6.8% to Bt952mn. Despite our upgrade, we
remain cautious about ITD's near-term earnings prospects given
the potential for a slowdown in large construction contracts
and possible delays in the airport project. Nevertheless, we
have upgraded our recommendation from SELL to HOLD as the
share price is now trading at an 8% discount to our fair value
estimate of Bt19.
Table 4: Profit
forecast revision
|
|
|
Original |
|
Revision |
|
Change |
|
|
|
2002 |
2003F |
2004F |
2002 |
2003F |
2004F |
2002 |
2003F |
2004F |
|
Sales |
20,486 |
19,967 |
21,249 |
21,034 |
18,859 |
21,818 |
2.7% |
(5.6%) |
2.7% |
|
Gross Margins |
11.3% |
10.7% |
12.5% |
10.3% |
10.4% |
11.4% |
|
|
|
|
Operating Margins |
4.0% |
5.3% |
6.1% |
4.4% |
5.2% |
5.9% |
|
|
|
|
Working capital |
1,985 |
2,797 |
3,922 |
2,719 |
2,632 |
3,998 |
734 |
(165) |
76 |
|
Debt |
5,741 |
5,141 |
5,394 |
5,915 |
4,499 |
4,154 |
174 |
(642) |
(1,240) |
|
Interest expenses |
317 |
406 |
426 |
302 |
351 |
414 |
(15) |
(54) |
(12) |
|
Net profits |
6,285 |
660 |
892 |
6,336 |
696 |
952 |
0.8% |
5.5% |
6.8% |
|
EPS |
18.9 |
2.0 |
2.7 |
23.1 |
2.10 |
2.87 |
22.1% |
5.5% |
6.8% |
|
Normalized profits |
759 |
660 |
892 |
822 |
696 |
952 |
8.4% |
5.5% |
6.8% |
|
Income
statement |
|
(Btmn) |
2001 |
2002F |
2003F |
2004F |
2005F |
|
Sales |
17,936 |
21,034 |
19,475 |
21,818 |
22,987 |
|
COGs |
16,424 |
18,861 |
17,463 |
19,334 |
20,163 |
|
Gross margins |
1,512 |
2,173 |
2,012 |
2,484 |
2,823 |
|
SG&A |
1,280 |
855 |
1,169 |
1,353 |
1,471 |
|
Operating margins |
232 |
1,318 |
844 |
1,132 |
1,352 |
|
Interest expenses |
1,225 |
647 |
307 |
360 |
413 |
|
Other income |
498 |
397 |
221 |
241 |
266 |
|
Pretax profits |
(495) |
1,068 |
758 |
1,012 |
1,204 |
|
Income taxes |
118 |
229 |
53 |
71 |
84 |
|
Associate Earnings |
(89) |
(9) |
(21) |
(30) |
(33) |
|
Minority Interests |
56 |
8 |
(25) |
(37) |
(31) |
|
Extraordinary Items |
(1,770) |
5,514 |
- |
- |
- |
|
Net income |
(2,528) |
6,336 |
709 |
948 |
1,118 |
|
Balance
sheets |
|
(Btmn) |
2001 |
2002F |
2003F |
2004F |
2005F |
|
Cash equivalent |
4,603 |
3,323 |
2,664 |
1,589 |
2,922 |
|
Receivable |
4,955 |
7,181 |
5,442 |
6,276 |
7,053 |
|
Inventories |
654 |
880 |
2,153 |
2,595 |
3,259 |
|
Investment |
2,774 |
956 |
973 |
1,110 |
1,129 |
|
Fixed Assets |
6,788 |
8,447 |
8,138 |
8,066 |
7,992 |
|
Total assets |
22,427 |
24,131 |
22,796 |
23,345 |
26,171 |
|
Credits |
5,509 |
5,343 |
4,880 |
4,873 |
5,027 |
|
ST-debts |
6,418 |
1,854 |
3,503 |
3,260 |
3,006 |
|
LT-debts |
6,231 |
4,005 |
1,168 |
1,087 |
3,006 |
|
Other liability |
5,124 |
3,565 |
3,590 |
3,627 |
3,658 |
|
Equities |
(856) |
9,365 |
9,656 |
10,498 |
11,474 |
|
Cash
flow statement |
|
(Btmn) |
2001 |
2002F |
2003F |
2004F |
2005F |
|
Net Profit |
(2,528) |
6,336 |
709 |
948 |
1,118 |
|
Depre./Amort. |
1,105 |
1,194 |
1,478 |
1,599 |
1,682 |
|
Net Working Cap. |
7 |
(2,620) |
3 |
(1,283) |
(1,287) |
|
Unrealized F/X |
(98) |
127 |
- |
- |
- |
|
Cash flow from operations |
2,158 |
(591) |
2,416 |
879 |
1,512 |
|
|
|
|
|
|
|
|
CAPEX |
(1,587) |
(2,853) |
(1,169) |
(1,527) |
(1,609) |
|
Investment |
(1,013) |
(1,818) |
(17) |
(136) |
(19) |
|
Cash flow from investing |
66 |
(4,160) |
(298) |
(1,664) |
(1,628) |
|
|
|
|
|
|
|
|
Debt Movement |
(271) |
(6,790) |
(1,188) |
(324) |
1,666 |
|
Capital Call |
- |
(2,715) |
(417) |
- |
- |
|
Dividend Paid |
- |
- |
- |
(106) |
(142) |
|
Cash flow from financing |
(271) |
2,583 |
(1,606) |
(430) |
1,524 |
|
|
|
|
|
|
|
Free cash flow |
571 |
(3,444) |
1,248 |
(648) |
(97) |
|
Financial
ratios |
|
|
2001 |
2002F |
2003F |
2004F |
2005F |
|
Gross margins |
8.4% |
10.3% |
10.3% |
11.4% |
12.3% |
|
Operating margins |
1.3% |
6.3% |
4.3% |
5.2% |
5.9% |
|
Net gearing |
(9.40) |
0.27 |
0.21 |
0.26 |
0.27 |
|
Interest coverage |
0.7 |
1.9 |
3.5 |
3.8 |
3.9 |
|
Inventory Days |
15 |
17 |
45 |
49 |
59 |
|
Collection Days |
101 |
125 |
102 |
105 |
112 |
|
Payment Days |
122 |
103 |
102 |
92 |
91 |
|
