In this briefing:
- PRM: Thai Largest Tanker Fleets Assured of Consistent Growth
- AEM Holdings: FY18 Results Solid; Decent FY19 Outlook; Upside Could Come from Huawei and Novoflex
1. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth
We initiate coverage of PRM with a BUY rating, based on a target price of Bt7.70, derived from a PEG ratio of 0.9x, which is the average for the Asia ex-japan transportation sector, implying 22.0x PE’19E.
The story:
- Secured revenue from domestic trading business
- IMO 2020 implementation to propel floating storage demand
- Recovery in T/C rate should prompt international trading turnaround
Risks: Lower-than-expected domestic oil consumption and trading activities in ASEAN, foreign currency and fuel cost fluctuations
2. AEM Holdings: FY18 Results Solid; Decent FY19 Outlook; Upside Could Come from Huawei and Novoflex
Aem Holdings (AEM SP) reported solid FY18 results and gave a decent outlook for FY19. Customer concentration remains high (85%+ of revenues linked to one of biggest IT companies globally) but new growth opportunities with Huawei and Novoflex could potentially add meaningfully to earnings and customer diversification as of FY20.
The balance sheet remains strong (58M SGD net cash) and should be further utilized for M&A to complement the current product offering.
Given the large change in the shareholder register over the past twelve months (after Novo Tellus distributed the shares to its LPs) free float is now 83% with Aberdeen and UBS among the largest shareholders. The high free float and low market cap make AEM a prime takeover candidate the coming 2-3 years.
Fair Value of 2.1 SGD remains unchanged (based on just 2x revenue or 10x FY2020 EV/EBITDA).
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