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UBS analyst put a report out today reiterating a buy rating. They rasisd their price target from .76 to .88 based on forward PE of 10X. They believe earnings have normalized and do not see financing as a major issue. The also are not concerned about the cash draw as it was expected for funding current projects. Two newer items that I haven't seen mentioned before, one positive and one negative: 1) Implied in the order book is that the co has secured roughly RMB344m of turnkey projects. This is a positive as the margin is higher on turnkey and the capex is less. 2) BIOT management indicates that the Chinese tax authority may standardize the tax rat at 25% which would take away the ability to negotiate tax concessions. UBS has been assuming progressively higher tax rates as concessions expired but if true it would mean projects from 2008 will not have any tax kickers. Overall they expect 16% reevenue rowth and 11% profit growth. This report more or less matches with my own view. I do believe that the lack of announcement on the governance issue is creating an artificial overhang on the stock. I believe this will be clarified later this month and I am still expecting the stock to move up gradually as it climbs the wall of worry. It may tend to outperform the STI if the market pulls back because at a 50% PE discount to the market it could actually be defensive.
Citigroup maintinaed a sell rating on BIOT. They appear to be most concerned about margin pressure and management credibility. Their price target is .71 cents. In their report they identify some "unattractive statistics" citing negative FCF and increasing gearing, and increasing receivable days.
My view is that these are to be expected because the cash is invested in projects. In a growing business investment and leverage can be a positive thing. I believe it makes a lot of sense to lever up the balance sheet to conduct a higher volume of business. If we are to take the management at its word, their plan is to cherry pick the best yielding opportunities rather than attempt to overexpand.
Also the 'Other operating expense line' turns out to be unrealized forex loss. i.e. not an ongoing operational cost. He also cites a decline in EBITDA Margin from 38% to 33% as a concern but this is less of a problem than it seems because after adding back the FX loss, the EBITDA marginw ould have been 35.2, the difference due mainly to slihgtly higher advertising expenses and increased overhead from project companies. Gross margin was basically unchanged from last quarter at 43%.
They revised their fully diluted EPS down by 1.1% and 1.4% for 07/08 respectively.
Some text from the Citigroup Analyst:
We maintain our Sell/Speculative Rating due to (1) board room uncertainties,
(2) lower returns for BOT contracts, which average 11-12% currently, versus
about 15-17% previously, (3) margin pressure on potential turnkey contracts as
BIOT penetrates new markets, (4) rising taxes, and (5) continued CB
amortization, higher gearing and interest expense. We adjust our earnings
estimates post 1H FY07 results.
hahaha. jackjames, we ban jin ba liang :)
but i luckier than you. i got 10-lots at 0.75. heh!
ya, results not fantastic leh. wonder if it will hinder the possible upward movement of Biot. i been in this counter since last year so can't wait to offload it.
dear lewsh88, me still learning to curb greed. no need to wiat till $1. if can reach past $0.80, i happy liao :)
vested too. But lewsh88, I am not that optimistic than you, I just wish it hit 0.84 first, then, lets talk about it... It is because 0.84 is a critical resistance we need to break first.
Heh, thank me if we all make money. Just to clarify my note, EPS is.18 CNY, not SGD. The SGD EPS is about .0356 SGD or full year .0731 SGD cents which puts P/E at yesterday's price of 73.5 cents at 10.0X.
Thanks FearAndGreed.
Vested. Looking forward to 1.00.
Kong Xi Fa Cai
Earnings out:
Looks decent EPS is .18 for half year vs .19 cent comparable last year. (The big decline occured 2H last year so this is pretty much business as usual with a modest increase in revenue). Net profit decline looks due to 'Other Operating Expense' Not sure what this is but since this category is usually this might be related to a settlement? Just my speculation.
My recommendation: BUY with upside to 1.00 to 1.10. With all due respect to TA comments, I believe the last two weeks are not really good data because the stock was idling before this important earnings release.
Financial Highlights in RMB?m 6 months ended
31 Dec 2006 6 months ended 31 Dec 2005 Change (%)
Revenue 712.7 634.9 +12.3
Gross Profit 309.6 273.6 +13.2
Operating Profit 206.2 196.2 +5.1
Net Profit 156.5 166.4 -6.0
From the Company:
The increase in finance expense from RMB4.1 million in 1HFY2006 to RMB27.3 million in 1HFY2007 was mainly due to the notional interest
expense related to CB .
The increase in other operating expenses from RMB313,000 in 1HFY2006 to RMB20.8 million in 1HFY2007 was mainly due to the provision of
foreign exchange (forex) loss as a result of flunctuation of RMB against SGD and HKD. During the period under review, there was an unrealized
forex loss resulting from weakening of RMB vs SGD (related to CB payable in SGD) as well as strengthening of RMB vs HKD (related to HKD
deposit in HK) .
Profit after tax decreased by 6% from RMB166.4 million in 1HFY2006 to RMB156.5 million in 1HFY2007 mainly due to the increase in administrative
expenses , other operating expenses and finance expenses during the current financial period.
The increase in administrative expenses by 30% from RMB30.3 million in 1HFY2006 to RMB39.4 million in 1HFY2007 was mainly due to the
increase in the number of project companies in 1HFY2007.
The decrease in distribution expenses by 24% from RMB28.1 million in 1HFY2006 to RMB21.3 million in 1HFY2007 was due to the decrease in
advertising expenses which were partially shared with distributors in 1HFY2007.
Revenue from wastewater treatment services in 1HFY2007 increased by 6% from RMB529.6 million in 1HFY2006 to RMB563.7 million in
1HFY2007, representing 79% of the total revenue. The remaining 21% came from i) discharging fees received from BOT/TOT projects and ii) the
sale of BMS products including BMS mobile toilets, BMS rubbish processors and accessories.
Income Statement
For 1HFY2007, the Group's revenue rose by 12% from RMB634.9 million in 1HFY2006 to RMB712.7 million in 1HFY2007, whereas net profit
decreased by 6% from RMB166.4 million in 1HFY2006 to RMB156.5 million in 1HFY2007.
Hopefully I'm wrong in the TA readings for this one! Let's see what happens in the next few days.
Dear Singaporegal,
I am afraid, this time you are wrong!
Hi Singaporegal.... u seem to be very caution, i notice with some of ur calls.......
with ur respect.... can share what the reason? chart say no good.. or some other thing..... STI too high..
Franklin Resources, Inc. ("Franklin") raise their stake !
The change in the percentage level is the result of a series of transactions that occurred between the dates of December 21, 2006 and February 02, 2007.
43,884,612 to 53,665,612 (From 5.00 % To 6.05 %). Good Luck