Friday, December 27, 2013

King Wan -10.5% Yield Sustainable (DMG)

King Wan Corp
Target Price: SGD0.43
Price: SGD0.29
10.5% Yield Sustainable

KWAN is the largest mechanical & electrical (M&E) player in Singapore with an orderbook stretching to CY16. It pays a core 5.3% yield, with KTIS potentially listing in Feb 2014. This will allow the company to double as well as maintain its dividend going forward. Management has shown investment acumen and willingness to pay dividends. Maintain BUY, with SGD0.43 TP, based on 7% yield.

¨ Largest M&E player in Singapore with strong core outlook. KWAN is Singapore’s largest M&E operator, with a healthy mix of public and private sector projects. Its investments in property and ship chartering are likely to provide strong non-core returns.

¨ Core dividend secured by large orderbook. KWAN declared a 0.5 cent interim dividend for 2Q14. We continue to expect a 1 cent core final dividend for 4Q14. Its total 1.5-cent dividend requires recurring earnings of only SGD5.2m, which KWAN will comfortably exceed in FY14, bolstered by its SGD147m-strong orderbook stretching up to CY16.

¨ Shareholders being paid 5.3% to wait. The stock’s core yield is 5.3%, which we see as sufficient incentive for shareholders to stick with KWAN while waiting for the listing of Kaset Thai Industry Sugar (KTIS).

¨ KTIS listing to unlock value and open door to 1.5-cent special dividend. In view of the political turmoil in Thailand, we see KTIS being listed around the auspicious Chinese New Year period in CY14. This will coincide with KWAN’s 4QFY14, during which we expect the company to liquidate much of its stake in KTIS and return part of the cash in the form of a 1.5-cent special dividend. This will boost the stock’s yield to 10.5%.

¨ Maintain BUY with SGD0.43 TP. KWAN is a well-run company that dominates Singapore’s M&E space. Its earnings are well supported by its core business, as well as its non-core associates. Management has investment acumen and shows a willingness to distribute dividends. Our unchanged SGD0.43 TP is based on a 7% dividend yield, which includes the upcoming special dividend. Maintain BUY.

Source/Extract/Excerpts/来源/转贴/摘录: DMG-Research,
Publish date: 23/12/13

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