HLG: 29 May 2008 Asiatic - Results in-line, maintain HOLD
Asiatic Development Berhad HOLD
Price target RM9.70
Share price at 28 May RM8.45
Investment summary
Q108 results were within HLG/market expectations. We maintain our HOLD rating: (1) valuation discount to big-caps is fair given lower liquidity/smaller market cap (EV/ha of RM106,000 against RM160,000 of big-cap planters); (2) passive capital management. With RM0.66/share in net cash and RM0.35/share in annual FCF, net DPS of RM0.10/share is too low, in our view. We are neutral on the plantation sector, and advocate switching from IOI/KLK to small/mid-cap planters such as Kulim, which offer better value/yield. Given the tight global supply of edible oil and grain, we expect CPO price to stay firm in the next 6 months.
Quiet stock
Low-beta stock with minimal newsflow. However valuations offer little upside for arbitrage gains, especially without near-term clarity on capital management or M&A.
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Saturday, 21 June 2008
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