DMG - TP S$1.73
3Q11 adjusted net profit of RMB56m (+5% YoY; -5% QoQ) was below our RMB62m projection as lower-than-expected animal food and mouth (FMD) vaccines sales of RMB18m was partially mitigated by powdered drug growth to RMB128m (our estimates: RMB50m; RMB117m respectively). Overall 3Q11 revenue increased by 30% to RMB209m although GPM extended its slide to 70% (2Q11: 71%; 3Q10: 76%) on new taxes and weaker margins for vaccines. We revise our FY11 earnings estimate down by 11% to RMB213m but maintain our FY12 figures. Despite FMD vaccines disappointment, we continue to like CAL for its exposure to upstream food production in China, as well as its resilient earnings and cash flow generative characteristic. We rollforward our target multiple and maintain our BUY recommendation at a new TP of S$0.35 (old: S$0.33) pegged to 5x FY12 EV/EBITDA (old: blended FY11/FY12).
20% powdered drug revenue growth. Powdered drug grew by 20% to RMB128m as high meat prices continued to stimulate demand for food production. Powdered drug GPM was stable at 77% as better product margins helped to offset impact from the introduction of two new taxes – City Construction and Education Supplementary Tax, which amounted to RMB8m for 9M11.
56% biological drug increase. Biological drug increased to RMB74m (2Q10: RMB47m) as FMD vaccines made its maiden contribution at RMB18m. Biological drug GPM however dipped by 19ppt to 57% due to lower ASP for blue ear vaccines in new markets and low utilisation for FMD production facilities, in addition to the two new taxes. Till date, CAL has obtained indicative orders from 17 provinces/municipals of RMB25m and RMB50m for swine fever and blue ear vaccines. For FMD, it has obtained RMB10m indicative orders from three provinces and distribution rights to seven provinces/municipals.
AM Fraser
SMRT - Q2 profit plunges 25.6% Rising energy prices continued to take their toll on SMRT Corp, with its net profit falling 25.6% year on year to $34.1mil for the 2Q ended Sept 30. Revenue for the three months climbed $15.1mil or 6.1% to $261.1mil. This was due mainly to higher MRT and bus ridership, contribution from Circle Line, higher taxi rental revenue, increase in external fleet maintenance revenue and higher rental and advertising revenue, partially offset by lower average fare for MRT and bus. SMRT declared an interim dividend of 1.75 cents per share.
CIMB - Target price S$1.77.
SMRT Corporation continued to battle stubbornly high costs in 2Q12. Elevated energy and staff costs resulted in a 7% pt drop in EBITDA margin. With FY12 shaping out to be a year of earnings contraction, we see no reason to be excited about the stock. Maintain Underperform.
PhillipCapital - Target Price S$1.68
- Poor first half results points to a weak FY12E
- Potential impairment charge could trigger further earnings cut
- Long term outlook of fare revision mechanism unclear
- Revised earnings estimates down by 6% for FY12E
- Downgrade to Sell with revised target price of S$1.68
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