Modernform Group – MODERN
Target price : Bt39.25
Recommendation : BUY
Closing Price (27 Feb 09) : Bt28.75
4Q08 profit down but full-year 2008 profit up 25.9%
- Knocked-down furniture maker MODERN posted a 4Q08 net profit of Bt81.8m, down both YoY and QoQ. For the whole of 2008, profit however jumped as high as 25.9% YoY.
- We estimate 2009 net profit growth to be a mere 6.7%.
- We also expect MODERN to pay a 2H08 dividend yield of 6.1%. We keep a 'Long-Term BUY' rating on MODERN with a price target of Bt39.25/share.
4Q08 net profit of Bt81.8, down YoY and QoQ, but full-year 2008 profit up as high as 25.9% YoY
Knocked-down furniture maker MODERN reported 4Q08 sales of Bt647m, down 1.9% YoY and 5.7% QoQ. Fourth-quarter net profit came in at Bt81.8m, or Bt0.97 a share, off 20.4% YoY and 22.9% QoQ. The quarterly profit decline on both YoY and QoQ basis contributed to (i) a drop of 0.35% YoY and 1.7% QoQ in gross margin to 36.9%, (ii) a fall of 1.9% YoY and 5.7% QoQ in sales to Bt647m, and (iii) a rise of 14.6% YoY and 2.7% QoQ in SG&A expenses to Bt178m, accounting for 27.56% of sales, up 3.95% YoY and 2.26% QoQ. For the whole of 2008, MODERN reported sales of Bt2,676m, up 9.4% YoY. Full-year net profit jumped as high as 25.9% to Bt382m, or Bt4.60 a share. The impressive profit growth reflected (i) a 1.08% gain in gross margin to 38.24%, (ii) a 1.38% fall in the SG&A expenses to sales ratio to 26.4%, (iii) a rise of 13.6% YoY in profit contribution from affiliates to Bt115m, and (iv) a drop in effective tax rates to 20.6% from a year-ago level of 22.2%.
2009 net profit growth expected to be a mere 6.7%
We expect 2009 sales to grow by 6.7% to Bt2,856m. Our forecast assumes a drop in gross margin to 38% from a year-ago figure of 38.24%. We estimate 2009 net profit to be about Bt408m, or Bt4.91 a share.
Estimated dividend yield of 6.1% for 2H08; Long-Term BUY rating maintained
Our 2009 price target of Bt39.25/share is equivalent to a P/E multiple of 8x. We keep a 'Long-Term BUY' rating on MODERN. We also expect MODERN to pay a 2H08 dividend of Bt1.75/share, equivalent to an un-annualized yield of 5.88%, based on the latest closing price of Bt28.75.
By Phillip Securities (Thailand) Plc. on Mar 2, 2009
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