KUALA LUMPUR: AmInvestment Research is upbeat on the outlook for Eonmetall with a fair value of 92 sen, which is 23 sen above its last traded price of 69 sen.
It said on Tuesday that for FY18, the company is expected to see additional earnings from the newly formed subsidiary, Constructor Asia Sdn Bhd (CASB), which is expected to start operations as early as 2H18 with an estimated annual revenue of RM40mil.
Eonmetall is in the final stage of negotiation with a public listed company to build several solvent oil extraction plants on a build-operate-transfer (BOT) basis and expects to deliver the plants as early as 1HFY18.
“In addition, Eonmetall may secure additional two plants on an outright purchase basis which are expected to be delivered as early as 1HFY18.
“We like Eonmetall for the growing acceptance by palm oil millers in Malaysia and Indonesia for its solvent oil extraction plants. Eonmetall enjoys good margins for these plants in the absence of competition, coupled with the in-sourcing of inputs (steel products and metalwork machinery) used in the fabrication of these plants,” said the research house.
Eonmetall recently teamed up with Gonvarri Material Handling AS (Gonvarri), whereby Eonmetall has obtained the licensing rights to manufacture and distribute steel racking solutions under the product flagship of Constructor from Europe for an initial term of five years with the option to renew for a further five years.
The strategic partnership allows both Gonvarri and Eonmetall to expand on their mutual plans to manufacture and distribute Constructor steel racking solutions across Asia-Pacific on the basis of equal profit sharing.
Eonmetall will also be able to expand its products range and market presence in Asia-Pacific leveraging the Constructor brand name through CASB which was incorporated in 4Q17.
“CASB is expected to begin its operation by 2H18 with an estimated annual revenue of RM40mil to RM60mil in FY18-20F and a healthy mid-to-high teens EBITDA margins.
“Meanwhile, Eonmetall will bear the full cost to set up the production facilities based on Gonvarri design and technology requirements, as well as technical expertise by Gonvarri for the steel racking production in accordance to Constructor’s quality standards prior to commencement of the production,” it said.
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