Target price : Bt15.00
Recommendation : BUY
Closing Price (28 April 09) : Bt14.80
Strong 1Q09 results
- Revenue and margin drove up profit 1Q09 to grow by 118% QoQ and 31% YoY
- Good results in 1Q09 particularly on the revenue side, we have revised
up our profit 2009 by 7%, thus making profit to grow by 13% in 2009.
- Despite limit upside on earning multiple, attractive yield of 8% would keep us to advise a BUY.
Revenue and margin drove up profit 1Q09 to grow by 118% QoQ and 31% YoY
DCC reported profit Bt288m, up 31% YoY and 118% QoQ. Revenue increased by 10% YoY and 41% QoQ on the back of seasonal effect and its low cost advantage to reap revenue from other players. Meanwhile, gross margin returned to 40% zone, substantially improved from 4Q08's and matched 1Q08's because of cost efficiency, lower energy cost as well as reduction in production cost from the gain from economy of scale on higher volume produced. This leaded to superb 1Q09 results.
Good results in 1Q09 particularly on the revenue side, we have revised up our profit 2009 by 7%, thus making profit to grow by 13% in 2009.
From strong quarter results to reveal revenue growth of 10% as opposed to 3% in our expectation, we revised up profit 2009 to account for upbeat 1Q09 performance. Nonetheless, we predicted revenue growth for 2009 at 3% when taking into account of low season in late 3Q to 4Q. With better cost management, margin should rise to 39.58% from 38.49%. As a consequence, profit 2009 would show growth of 13% to Bt752m or Bt1.85, which was lifted up from previous forecasts by 7%. Dividend for 2009 would be estimated at Bt1.30, implied 8% yield on its latest close.
Share Valuation
Given EPS growth 13%, DCC share is trading at 8x earning 2009 which is almost at par to average of historic low P/E. Earning-based valuation does not offer much upside. But with great yield of 8%, we still rate BUY with fair value of Bt15.
By Phillip Securities (Thailand) Plc. on Apr 29, 2009
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