Investors’ Corner (Jadason Enterprises, Q&M Dental Group (Singapore), Fu Yu Corporation, First Resources)

Jadason Enterprises
Price – $0.036
Target – $0.073

Jadason Enterprises (Jadason) missed expectations with a loss of $0.4m. Although there was a recovery in gross profit margin to 22.4% driven by a better product mix in the PCB drilling segment, the 7% decline in revenue led to lower profitability. At the operating profit level, the distribution business incurred a loss of $0.5m while the PCB drilling business registered a profit of $0.3m. Excluding an exchange loss of $0.6m, adjusted net profit was $0.1m. In addition, the group remained in a net cash position. Jadason guided for a challenging 2H18 due to the trade tensions between the US and China which would affect the group’s end customers. Given the uncertain demand outlook, we lower our target price to $0.073 based on an unchanged one time price-to-book value. Maintain ADD. CIMB Research (16 Aug).

Q&M Dental Group (Singapore)
Price – $0.51
Target – $0.649

Q&M Dental Group’s (Q&M) 1H18 revenue and PATMI met 39.3% and 49.7% of our full year expectations respectively. The group adopted an aggressive expansion plan with 3 new clinics opened in 1H18, and another 4 more clinics for Singapore and 3 for Malaysia underway in 2H18. Meanwhile, organic growth is also robust with distribution revenue excluding Aoxin increasing 51% attributable to higher revenue from the distribution company in Malaysia. We do not discount the possibility that Q&M will expand into Southern China via JV with its Chinese associate, Aoxin Q&M Dental Group, which has a strong presence in Northern China. In accordance to the group’s dividend policy of paying out at least 30% of core operating earnings, interim dividend was lower at $0.004. There is no change to our earnings estimates, and based on estimated FY18 EPS of $0.023 and 28 times P/E ratio, we raised our target price to $0.65. Upgrade to BUY. Phillip Securities (16 Aug).

Fu Yu Corporation
Price – $0.17
Target – $0.22

Fu Yu Corporation’s (Fu Yu) 2Q18 topline rose 7.4% while PATMI surged 553% to $4m. This was accompanied by an improvement of gross margin to 16.9% driven by higher-margin new projects in the automotive, consumer and medical segments. The group has a strong balance sheet with a net cash of $73.9m and zero debt. This is despite the privatisation of its Malaysian subsidiary, LCTH Corporation, which took more than $20m but contributed to Fu Yu’s PATMI boost. To reward shareholders on the company’s performance, management declared an increased interim dividend of $0.003. We expect Fu Yu’s FY18 dividends to be raised to $0.016 representing an attractive dividend yield of 9.2%. With more positive signs affirming Fu Yu’s growth coupled with the ramp-ups expected in 3Q18 and 4Q18, we believe topline and profitability would continue to trend upwards in subsequent quarters. Upgrade to BUY. RHB Research (15 Aug).

First Resources
Price – $1.56
Target – $2.00

First Resources’ (FR) 2Q18 core PATMI met 26% of our full-year estimates lifted in part by the net inventory drawdown of 16,000 MT. Operationally, higher output in 2Q18 more than offset the lower CPO average selling price (ASP). Meanwhile for downstream division, the group recorded good EBITDA margins of US$24/t which we think can be attributed to the pick up in biodiesel order. FFB nucleus output grew sharply higher in 2Q18 to 0.7m MT bringing 1H18 FFB nucleus output to 1.4m MT. We maintained our 2018 FFB nucleus output growth forecast of 13% pending guidance from FR. Overall 1H18 results were affected by a net inventory build-up of 21,000 MT which may be released in 2H18 to deliver higher profits. Coupled with seasonally higher output in 2H18 to offset lower CPO ASP, we continue to like FR for its medium-term growth prospect keeping target price unchanged at $2 pegged at 17 times P/E ratio. Maintain BUY. Maybank Kim Eng (14 Aug)