12-month target price : Bt13.00
Recommendation : BUY
Closing Price (30 Dec 08) : Bt11.40
Compelling dividend yield
- We expect AIT's 2008 earnings growth to be as high as 104% YoY on the back of strong revenue contribution from large-scale projects.
- Currently, AIT has an order backlog of roughly Bt1.5b-Bt1.6b. Ongoing tendering opportunities for the projects worth Bt1b-Bt1.5b with the bid results due to be announced in 1Q09 would be a catalyst to grow backlog and drive revenue growth in 2009.
- The stock offers an estimated annual dividend yield of over 10% with an interim dividend of Bt1.25/share already paid in 1H08.
- We retain a BUY rating on AIT, based on cheap valuation and attractive dividend yield.
2008 earnings growth expected to be as high as 104% YoY
In our opinion, 2008 is expected to be one of the best years for AIT in terms of strong earnings growth boosted by higher revenue contribution from large-scale projects. Even though impairment loss on equipment for lease would take a bite out of its profits, we expect earnings growth to remain robust. At end-3Q08, AIT had an order backlog of Bt1,193m to be delivered in 4Q08 and 2009. Our 2008 forecast assumes full-year sales of Bt3,028m, up 85% YoY. Rental income should fall back as a result of a drop in unit rental rate following expiry of existing contracts and profitability would erode. SG&A expenses tend to rise on increased staff levels and higher sales. We estimate AIT's 2008 net profit to be about Bt191m, up as high as 104% YoY.
2009 earnings likely to fall 22% YoY
Currently, AIT has an order backlog of roughly Bt1.5b-Bt1.6b. On-going tendering opportunities for the projects worth Bt1b-Bt1.5b with the bid results due to be announced in 1Q09 would be a catalyst to grow backlog and drive revenue growth in 2009. We also believe economic slowdown would cut into revenue from the private-sector projects. Large state enterprises, key clients of AIT should also be pinched by the double whammy of economic downturn and domestic political instability, which may derail bidding for large-scale projects and hurt its anticipated future revenue stream. Our 2009 forecast assumes sales of Bt2,681m, down 11% YoY and a likely pickup in gross margin. We estimate AIT's 2009 net profit to be roughly Bt150m, down 22% YoY.
Estimated annual dividend yield of over 10%
The stock offers an estimated annual dividend yield of over 10% with an interim dividend of Bt1.25/share already paid in 1H08. We forecast final DPS of at least Bt1 for 2H08 performance.
BUY rating with a Bt13/share price target
Cheap valuation and attractive dividend yield are enough to warrant a BUY recommendation on AIT stock though we expect a drop in 2009 earnings in the face of economic gloom. At current valuation of 3.5x 2008 P/E and 4.5x 2009 P/E, the stock looks undervalued compared to its peers. Our price target of Bt13/share is based on a P/E of 6x.
By Phillip Securities (Thailand) Plc. on Dec 30, 2008
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