Inter-Roller Engineering, Sept 13 close: $1.55

DBS VICKERS SECURITIES, Sept 13

WE continue to rate Inter-Roller as one of our top small-cap picks. The group delivered record 2Q05 results that were above expectations. 1H05 results were above expectations. Earnings of $4.4 million for 2Q05 were its highest achieved in any quarter ever. Margins improved as increased utilisation of the group's manufacturing capacity meant greater economies of scale.

On Aug 30, the group said it had won projects worth $83 million in China, the UK and Asean including Singapore. IRL has secured $212 million worth of new contracts this year and has raised its order book (as of 1H05) to $229 million. It is also bidding for other projects in Latin America, China, the Middle East and South Asia. We have raised our earnings forecast for FY05 and FY06 by 4 per cent and 20 per cent respectively.

Maintain 'buy'. We have raised our target price to $1.91 (based on 10x FY06 PER) to reflect our raised earnings forecast. Valuations remain attractive at 7.7x FY06 PER, offering 5.8 per cent prospective yield. The group's proposed 2:5 bonus issues, expected to go ex on Sept 28, should help boost the stock's liquidity. - BUY

《The Business Times》