KUALA LUMPUR: Affin Hwang Capital Research has initiated coverage on Kim Hin Industry Bhd
, one of four Malaysian-listed pure-play tile manufacturers.
It has given the tile manufacturer a Hold rating with a 12-month target price of RM1.73 based on a prive/book of 0.45x.
"Given its strong net cash position (20 sen/share) and strong FCF (13.4sen/share), we forecast DPS of six sen in FY17-19E to be maintained, giving a reasonable net yield of 3.6%."
According to the research firm, Kim Hin has about 25% share of domestic revenue and an international presence in China, Australia and Vietnam as well.
About 70% of Kim Hin's revenue is derived from the local market and the remainder from exports.
Kim Him made three key acquisitions in FY14-16 and now plans to allocate RM10mil to upgrade its existing facilities.
"We expect moderate earnings growth in FY18/19E of 15%/23% y-o-y
given rising energy costs, intense price competition among manufacturers and lower export revenue due to Ringgit appreciation against the US$.
"But this could be partially offset by a better contribution from Australia, where a moderate property market recovery could drive higher ceramic demand," said Affin Hwang Research.
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