KUALA LUMPUR: Affin Hwang Capital Research maintained hold on Elk-Desa Resources Bhd
with an unchanged target price of RM1.18 despite management's upbeat outlook.
The research firm said management indicated that its strategy focused on financing used cars with value of RM35,000 and below.
It said this diversification from focusing only on used cars worth RM20,000 and beloe wil contribute positive to ELK's receivables growth while remaining within its prudent risk appetite.
PublicInvest Research added that ELK is undertaking an operational restructuring in the furniture segment to refocus their sales in the domestic market.
"In addition to their retail outlets, management indicated plans to partner with other dealers and expand their wholesale distribution to drive sales."
"ELK’s 9MFY18 EPS declined by 9.9% yoy as a result of dilutive effect of a RM54m rights issue (completed in Sept 2017), which had caused the
weighted average number of shares to increase by 21%.
"In our view, future EPS dilution could be minimized through leverage as management expands its business. As at Dec2017, ELK’s group gearing level is at 0.12x and has ample room to gear-up."
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