Toyo-Thai Corporation
On track to meet our FY11F earnings
Buy; Bt10.60
Price Target : Bt 14.40
3Q11 result was in line
9M11 profit is 66% of our FY11F earnings
Reiterate BUY and Bt14.40 TP, pegged to 12x FY12F PE
Comment on Result
Earnings flat YoY, but surged 17% QoQ. Q3 is typically a seasonally slow quarter for Thai contractors due to the monsoon season. Despite this, revenue grew 40% YoY, but earnings were relatively flat YoY because of several EPC contracts in 2010 were EPCm, (Management of engineering, procurement and construction) which margins are significantly higher than for pure EPC contracts which dominates the backlog in this year.
Earnings on track to meet our full year forecast. The floods have had limited impact on TTCL because most of its projects are overseas. And we had previously factored in the impact of floods on its domestic project, the Navanakorn Electricity Plant.
Major awards to be announced this month. We expect the company to be awarded another project in Qatar worth Bt10bn. It would involve building a facility to convert sea water into fresh water. If this happens, its backlog would reach Bt30bn, sufficient to secure our forecast revenues for the next two years.
Recommendation
Maintain BUY. TTCL’s fundamentals remains strong. Its backlog is at a record high of Bt20bn and balance sheet is in net cash position. The stock now offers 37% upside to our Bt14.40 target price that is pegged to 12x FY12F PE, plus 4.5% dividend yield for this year.
