Eonmetall Group : If Da Vinci Were IT-Savvy BUY

STOCK FOCUS OF THE DAY

Eonmetall Group : If Da Vinci Were IT-Savvy        BUY

We believe Eonmetall has put itself back onto a growth path, having found itself a “blue ocean” in the engineering, procurement, construction and commissioning (EPCC) of palm-pressed fibre oil extraction (PFOE) and palm kernel oil extraction (PKOE) plants, an innovation which is an extension to its core competencies in metalwork machinery and IT. For its bread and butter businesses, Eonmetall’s game plans have also been “innovation” for metalwork machinery (making the machines smarter and more automated by leveraging on its competence in IT), and “re-invention” for steel products (moving up the value chain by venturing into value-added product, i.e. racking systems). Eonmetall has cost advantages in the form of: i) an exemption from import duty (15%) on key input hot-rolled coils (HRC), by virtue of it being a maker of cold-rolled coils (CRC); and ii) low capital cost due to insourcing of metalwork machinery.

We project Eonmetall’s net profit to more than triple in FY16, and rise by a further 9.2% in FY17 driven largely by outstanding and potential new PFOE plant EPCC projects. We value Eonmetall at RM1.05 based on 8x FY17F EPS. We initiate coverage on Eonmetall with a BUY call.

Others :

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Genting Singapore : In the red on low VIP win rate and severance costs SELL

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