STOCK FOCUS OF THE DAY
Eonmetall Group : OEM steel racking manufacturer in the making BUY
We maintain our BUY and FV of RM0.97 but raise our FY19F earnings by 18% (earnings for FY17F & FY18F remain unchanged), following a recent meeting with Eonmetall Group. Our FV is based on 8x FY18F EPS of 12.1 sen, a discount to the manufacturing sector’s average 1-year forward PE of 10-11x to reflect Eonmetall’s relatively small market capitalization of less than RM150mil.
Our FY19F earnings upgrade forecast is premised upon the positive development in Eonmetall. For machinery and equipment, Eonmetall is currently in the final stage of negotiation with a public-listed company for the construction of several PFOE plants on a build-operate-transfer (BOT) basis and expect to deliver the PFOE plants as early 1HFY18. In addition, Eonmetall may secure additional two PFOE plants on an outright purchase basis which are expected to be delivered as early 1HFY18.
In addition, Eonmetall’s steel and trading division earnings are expected to grow stronger in 2HFY18 through is steel racking business via the newly formed subsidiary of Eonmetall, Constructor Asia Sdn Bhd (CASB) which is the contract manufacturer and distributor of the steel racking solution (within the Asia Pacific region ex-Middle East) under the product flagship of Constructor from Europe. Eonmetall’s plans for overseas expansion are also progressing well .
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