TA Securities Research expects building materials player Chin Hin Group Bhd to register flattish earnings going forward.
It says in a recent meeting with the management of Chin Hin, the latter had guided for a nondescript year in terms of earnings in 2020 as the demand for building materials is recovering at a very slow pace.
TA adds that the company’s associates will support group earnings with its healthy order book and growing earnings contribution. The group is actively looking for tenants for its integrated workers complex in Pengerang, Johor.
The research house expects Chin Hin to raise its dividend payout for FY19 supported by its stance of reducing its gearing levels by disposing of non-core assets.
“The current order book of its manufacturing segment stands at around RM250 mil which can last the group for 12 months,” says TA. The order book mainly comprises orders for autoclaved aerated concrete (AAC) and pre-cast products. Meanwhile, the utilisation rate for the new AAC plant in Kota Tinggi remains at about 35%.
Besides looking for more orders from East Malaysia, the management is aggressively tendering for contracts in Singapore, the Philippines, and Australia in order to offset the sluggish demand for building materials locally.
The group has already completed six of the 23 blocks for the integrated workers’ complex in Pengerang, according to the management, says TA.
It is currently focusing on securing tenants for the completed blocks, which can accommodate about 2,500 workers while the construction of the remaining 17 blocks will be put on hold. The management expects the take-up rate for the existing six blocks to improve once the Phase 2 of Rapid project in Pengerang takes shape.
The group recently disposed of RM76.5 mil of non-core real estate assets to its major shareholders to raise cash in order to repay bank loans and finance working capital.
TA has maintained its sell call on Chin Hin with a target price of 70 sen. At noon today, the shares were traded at 71 sen with a volume of 364,000 shares. – Jan 7, 2020
