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Sunvic - Cheap valuations, record year but...
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crclk15
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12-Oct-2010 22:42
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According to Bloomberg, Sunvic trades at an estimated PE of around 4.3x. Cheap valuations and FY10 is likely to be a record year but there are some nagging concerns for a fundamental investor. Limited growth in FY2011: According to Poems estimates, Sunvic is operating at close to max utilization in 1HFY10. I.e there wont be much growth in earnings in 2011, except for operating efficiencies and improvements in ASP if any. FYI, Company's new AA plant Phase 1 will only commence commercial production in FY2012. There is not much info on this as in whether Phase 1 will commence in Jan 2012 or Dec 2012; 2. Volatile ASP: This makes forecasting of results difficult. 3. Cash tight: High gearing of 43% with RMB908.8M of loans due within a year. Their cash and cash equivalents only amounted to RMB694M. I.e they have to get refinancing on these loans. May not be easy to get good loans at attractive rates with their track record. (other points are available at my blog, too lengthy to pen it here) Suffice to say that cash tight situation is likely to lead to less dividends dish out to shareholders and possibility of equity raising. Kindly refer to http://ernestlim15.blogspot.com/2010/10/sunvic-cheap-valuations-record-year-but.html for more information. |
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