Summary: Jackspeed Corporation Ltd (JS) released its 1H08 results, which
were below expectations. While revenue remained stable at S$22.3m, net
profit fell 32% YoY to S$1m. Pretax profit fell 39% YoY to S$1.4m due to
higher staff costs, lower foreign exchange gains and losses from its
start-up associated companies. On a positive note, JS’ aviation segment saw
robust revenue growth of 258% YoY in 1H08 and JS has obtained the SAR145
certification from CAAS. This allows JS to solicit contracts directly from
airlines for interior refurbishment of aircrafts. We believe this
certification would help propel growth for JS’ aviation business. While we
expect JS to maintain its profitability in FY08, we are lowering our FY08
earnings estimates by 5% to S$3.8m (from S$4m previously) and from S$5.4m
to S$5.1m for FY09. With margins coming under pressure from intense
competition and rising raw material costs and Aviation unable to mitigate
those pressures totally, we are now valuing the stock at 11x PER (13x
previously). Our fair value for JS has been revised down from S$0.33 to
S$0.26. With the stock trading at around S$0.26, we therefore downgrade
rating for the stock to a HOLD.
October 15, 2007...11:55 am
Jackspeed Corporation
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