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Brokers' Take - Inter-Roller Engineering
Brokers' Take - Inter-Roller Engineering

(2006-11-09)

Inter-Roller Engineering
Nov 8 close: 71 cents
CITIGROUP, Nov 7

WE have lowered our target price to $1.04 from $1.15 on trimmed FY07-08E earnings and rolling forward our target multiple of 13x to December 07 (from June 07). Trading at a P/E of 8.9x FY07E and an attractive yield of 8 per cent, we continue to be optimistic on the industry strength and expect new orders to flow.

We have raised our FY06 earnings by 13 per cent as the revenue recognition from secured contracts were faster than expected. However, we have halved our FY06E order assumptions, and trimmed the next two years by 10-15 per cent. FY07-08E earnings estimates are thus trimmed by 22 per cent and 21 per cent, respectively, as 2006 new orders are unlikely to match the 2005 record year.

Management remains optimistic and sees exciting prospects in China, India, Europe and the Middle East. The group is working on a number of high value projects that could materialise in 2007.

It delivered a solid 9M06 with revenues up 72 per cent year-on-year to $122 million, while net income was up 87 per cent year-on-year to $21.2 million. Net margins of 17.4 per cent improved year-on-year on the 16.1 per cent in 9M05.

The group was able to add $11.6 million of orders in 3Q06 to a total of $56.6 million year to date. Net order book stood at $111.6 million.

BUY

《The Business Times》


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