วันพุธที่ 27 พฤษภาคม พ.ศ. 2552

Kim Eng Current Stock Market Recommends Fully-Valued STEC

Sino-Thai Engineering & Construction (STEC) - FULLY-VALUED

Price (Bt) 3.70
Target (Bt) 3.68
Set Index 533.92

Lower construction revenue with bright prospects for new projects

Lower revenue causes earnings to drop 42% qoq for 1Q09
STEC announced 1Q09 earnings of Bt48mn, down 42% qoq, given lower

current stock market reports
construction revenue with higher SG&A expenses. However, when compared yoy, the normalised profit turned positive from a loss of -Bt5mn in the same period of last year given an improvement in gross margins. Revenue fell 27% yoy and 28% qoq to Bt2.66bn given a lower backlog from the weak construction industry last year. Meanwhile, the gross margins widened slightly to 3.8% in 1Q09 from 3.7% last quarter. The SG&A has risen back to the normal level of Bt88mn from an abnormally low last quarter when the company made an accounting adjustment on overhead expenses.

Waiting for bidding results on the second Purple Line contract
Although STEC secured only one project worth Bt545mn in 1Q09, the company has high hopes of
securing many additional projects in the remainder of this year given the government policy to speed up
investment to stimulate economy, as well as the new mass transit projects. STEC is now awaiting bidding
results on the second Purple Line mass transit contract worth Bt12.6bn. The price-bidding documents for
this project should be opened in June. STEC has a good chance to secure this contract, as the STEC bid
price on the first contract was just 2.25% higher than the winning CKTC joint venture bid. In addition, we
expect 2-3 more mass transit lines to be opened for bidding this year, including the Red Line Bang Sue –
Rangsit and the extension of the Green Line. As of 1Q09, STEC has a backlog worth Bt9.98bn, of which
Bt6.5bn should be recognised as revenue this year.

Positive factors mostly priced in, recommend FULLY-VALUED
Given brighter prospects on backlog growth from the coming public investment and the mass transit
projects, we have raised our fair value estimate to Bt3.68/share based on a 2009 PER of 25x. However, the
current share price has mostly reflected these positive factors, increasing 54% since the beginning of this
year and has now already reached our new price target. We, hence, recommend a FULLY-VALUED on STEC.

Earnings summary
Year End Dec 31 2006 2007 2008 2009F 2010F
Sales (Btmn) 14,707 17,282 14,590 10,580 10,950
EBITDA (Btmn) -1,179 612 824 830 825
Normalised earnings (Btmn) -1,780 -38 135 174 198
Earnings (Btmn) -1,780 22 178 174 198
EPS (Bt) -1.5 0.02 0.15 0.15 0.17
PER (x) N.A. 202.5 24.6 25.2 22.2
EV/EBITDA (x) -4 7.6 5.2 4.8 5
Free cash flow (Btmn) 18 123 128 291 447
CF/share (Bt) 0.62 0.38 0.64 0.51 0.65
BVPS (Bt) 3.2 3.2 3.6 3.7 3.9
P/BV (x) 1.15 1.16 1.03 0.99 0.95
DPS (Bt) - - - - -
Dividend yield (%) 0.00% 0.00% 0.00% 0.00% 0.00%
Net debt/equity (x) 0.09 0.08 -0.03 -0.08 -0.05
ROA (%) -12.60% 0.10% 1.30% 1.40% 1.60%
ROE (%) -45.70% 0.60% 4.40% 4.00% 4.40%
Source : Company reports and KELIVE Research estimates.

Outstanding loans increased slightly to Bt889mn in 1Q09 from Bt836mn last quarter, hence bringing
up gearing to 0.21x from 0.20x last quarter. Meanwhile, the total debt to equity ratio declined to 1.67x
from 1.87x last quarter. At this gearing level, the company financial risk remains low.

By Kim Eng Securities (Thailand) Company Limited on May 18, 2009

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