25 February 2007
CG Tech
Toptrader Upgrades CG Tech to Strong Strong Buy!
Target Price for 2007 S$1.39!
Target Price for 2008 S$2.50!
Buy / Add on Short Term Support.
some highlights derived from annual report
FY2005 against FY2006 in Chinese Yuan
turnover from yuan 464m to yuan 707m, up 52%
gross profit 117m to 185m, up 57%
gross profit margin from 25.3% to 26.2%
net proift for FY2006 yuan 83.593m to yuan 134.790m
net profit margin from 18.0% to 19.1%
cash increased from yuan 135m to yuan 272m
inventory increased from 20m to 31m
trade receivables 62m to 83m
trade payables 14m to 29m
short term loan 19m to 0, meaning no outsatnding short term loan
long term secured loan from 0 to 157m due mainly to purchase of assets
net cash generated from operation 86m to 146m
net cash for investing activities 39m to 127m due mainly to purchase fixed assets for a cash of 110m
total shares outstanding 260m shares
eps 0.3477 to 0.5184
eps calculation: eps for FY2006 = net profit yuan 134.79m / 260m shares = yuan 0.5184 per share = S$ 0.104 per share
NAV per share = net asset value per share 1.11 to 1.55
taxation - 2 Longyan subsidiaries to pay tax from 15% to 27% from 01 Jan 07 onwards since tax relief expired main raw material used by CG relates to crude oil, thus oil price fluctuation will have direct impact to her profit margin
dividend per share yuan 0.075 = S$0.015
bonus shares issue 50% of existing shares, 130m shares in total, you get 1000 shares as bonus, CNY hongbao, if you have 2000 existing shares
over 90% turnover derived from PRC
A commentary at the date of the announcement of the significant trends and competitive strength
following events would be significant to CG's operations in the next 12 months.
The Group has begun the construction of a new plant for the production of polyester short fibre (“PSF”). The Group expects the construction to be completed by the end of third quarter of 2007 and plans to commence production in the fourth quarter of 2007. Upon completion, the new factory will have an annual PSF
production capacity of approximately 10,000 tons. The estimated payback period is about 3-4 years, which is in line with the Group’s current investments. Currently, the Group is producing both upstream raw materials for PSF, PET chips and downstream PSF yarn products. End products’ (garments’) functions and features such as ‘breathability’, anti-odour, infrared protection, etc, are mainly derived from the chemical and physical treatment during the production of PET chips and fibre. Therefore, by integrating the current PET chip production with the production of PSF, the Group will be able to offer its current and potential customers better-differentiated products. Moreover, the Group currently has to source for PSF to use as raw materials in its yarn production. By manufacturing PSF in-house, the Group will be able to create higher value for its customers and retain higher margins for its shareholders. Lastly, it is in line with the Group’s overall strategy of cusing on manufacturing differentiated premium quality and functional products.
The Group has also begun the construction of a new plant for the production of compact combed yarn. The Group expects the construction to be completed by the end of 2007 and plans to commence production in th first quarter of 2008. Upon completion, the new factory will have an annual production capacity of approximately 7,000 tons for compact combed yarn. The establishment of a compact combed yarn production facility is a natural progression of the current combed yarn production facility, which has commenced production in May 2006. Our annual capacity for combed yarn is approximately 6,000 tonnes. From May to December 2006, the combed yarn products have contributed turnover and gross profit of RMB101.3 million and RMB27.6 million respectively, representing 14% and 15% respectively of our Group’s turnover and gross profit for the year ended 31 December 2006. Our Directors believe that the rising affluence of the PRC population will spur demand for high quality textile products, which will increase the demand for raw materials required for the production of these products.Combed yarn and compact combed yarn are examples of such raw materials, capable of producing textiles of finer qualities. Combed yarn and compact combed yarn are strong, fine and smooth yarn which are used to produce high quality textiles which are mainly used in garments of finer quality. Based on our industry knowledge, the domestic supply of compact combed yarn products is insufficient to meet domestic demand, as manufacturing of compact combed yarn products requires special technical knowledge. The successful commencement of production for combed yarn products has equipped the Group with the necessary technical know-how to enter into the production of compact combed yarn products.The expansion of the production facilities for compact combed yarn products with higher margin than our
existing combed yarn products is part of our Group’s growth strategy of focusing on higher margin differentiated functional products with strong cash flows that are able to continuously enhance the overall profitability of the Group and shareholder returns. - 7777777 appreciates the attitude of the management of CG Tech.
below is a quote from my blog posted on 01 Dec 06,
http://www.toptrader.blogspot.com/
Quote:
New product PSF
revenue = Yuan 18000/ton X capacity 10000 tons = yuan 180m =S$36m
GPM 30%, GP=36mX30%=S$10.8m
to start production 3Q2007
New product CCY (compact combed yarn)
revenue = yuan 31000/ton X capacity 7000 tons=yuan 217m=S$43.4m
GPM 32%, GP=S$43.4X32%=S$13.888m
to start production 4Q2007
Total GP for new products to be added=10.8+13.888=S$24.688m
total shares outstanding = 260m, eps for 2008 for newly added products portion only = (24.688X70%)/260 = S$0.066 for FY08,
eps FY06 0.108 tg 0.54-1.08 if pe=5-10
eps FY07 0.129 tg 0.645-1.29 if pe=5-10
eps FY08 0.222 tg 1.11-2.22 if pe=5-10
below is my revised estimates after a careful review,
New product PSF
revenue = Yuan 18000/ton X capacity 10000 tons = yuan 180m =S$36m
GPM 30%, GP=36mX30%=S$10.8m
to start production 4Q2007 (delayed 1 quater, see above)
New product compact combed yarn
revenue = yuan 31000/ton X capacity 7000 tons=yuan 217m=S$43.4m
GPM 32%, GP=S$43.4X32%=S$13.888m
to start production 1Q2008 (delayed 1 quarter, see above)
Total GP for new products to be added=10.8+13.888=S$24.688m
total shares outstanding = 260m
eps for 2008 for newly added products portion only = (24.688X70%)/260 = S$0.066 for FY08,
eps FY06 = 0.104 tg 0.52-1.04 if pe=5-10
eps FY07 = 0.104X1.333 = 0.139 tg 0.695-1.39 if pe=5-10 (note CG trading near lower band of the tg scope)
eps FY08 = 0.139X1.333+0.066 = 0.250 tg 1.25-2.50 if pe=5-10
Therefore, I upgrade CG Tech to strong strong buy.
CG Tech target price for 2007 is 1.39, implying an upside of 78% from current price of .78.
CG Tech target price for 2008 is 2.50.
Huat Arrh...
Toptrader Upgrades CG Tech to Strong Strong Buy!
Target Price for 2007 S$1.39!
Target Price for 2008 S$2.50!
Buy / Add on Short Term Support.
some highlights derived from annual report
FY2005 against FY2006 in Chinese Yuan
turnover from yuan 464m to yuan 707m, up 52%
gross profit 117m to 185m, up 57%
gross profit margin from 25.3% to 26.2%
net proift for FY2006 yuan 83.593m to yuan 134.790m
net profit margin from 18.0% to 19.1%
cash increased from yuan 135m to yuan 272m
inventory increased from 20m to 31m
trade receivables 62m to 83m
trade payables 14m to 29m
short term loan 19m to 0, meaning no outsatnding short term loan
long term secured loan from 0 to 157m due mainly to purchase of assets
net cash generated from operation 86m to 146m
net cash for investing activities 39m to 127m due mainly to purchase fixed assets for a cash of 110m
total shares outstanding 260m shares
eps 0.3477 to 0.5184
eps calculation: eps for FY2006 = net profit yuan 134.79m / 260m shares = yuan 0.5184 per share = S$ 0.104 per share
NAV per share = net asset value per share 1.11 to 1.55
taxation - 2 Longyan subsidiaries to pay tax from 15% to 27% from 01 Jan 07 onwards since tax relief expired main raw material used by CG relates to crude oil, thus oil price fluctuation will have direct impact to her profit margin
dividend per share yuan 0.075 = S$0.015
bonus shares issue 50% of existing shares, 130m shares in total, you get 1000 shares as bonus, CNY hongbao, if you have 2000 existing shares
over 90% turnover derived from PRC
A commentary at the date of the announcement of the significant trends and competitive strength
following events would be significant to CG's operations in the next 12 months.
The Group has begun the construction of a new plant for the production of polyester short fibre (“PSF”). The Group expects the construction to be completed by the end of third quarter of 2007 and plans to commence production in the fourth quarter of 2007. Upon completion, the new factory will have an annual PSF
production capacity of approximately 10,000 tons. The estimated payback period is about 3-4 years, which is in line with the Group’s current investments. Currently, the Group is producing both upstream raw materials for PSF, PET chips and downstream PSF yarn products. End products’ (garments’) functions and features such as ‘breathability’, anti-odour, infrared protection, etc, are mainly derived from the chemical and physical treatment during the production of PET chips and fibre. Therefore, by integrating the current PET chip production with the production of PSF, the Group will be able to offer its current and potential customers better-differentiated products. Moreover, the Group currently has to source for PSF to use as raw materials in its yarn production. By manufacturing PSF in-house, the Group will be able to create higher value for its customers and retain higher margins for its shareholders. Lastly, it is in line with the Group’s overall strategy of cusing on manufacturing differentiated premium quality and functional products.
The Group has also begun the construction of a new plant for the production of compact combed yarn. The Group expects the construction to be completed by the end of 2007 and plans to commence production in th first quarter of 2008. Upon completion, the new factory will have an annual production capacity of approximately 7,000 tons for compact combed yarn. The establishment of a compact combed yarn production facility is a natural progression of the current combed yarn production facility, which has commenced production in May 2006. Our annual capacity for combed yarn is approximately 6,000 tonnes. From May to December 2006, the combed yarn products have contributed turnover and gross profit of RMB101.3 million and RMB27.6 million respectively, representing 14% and 15% respectively of our Group’s turnover and gross profit for the year ended 31 December 2006. Our Directors believe that the rising affluence of the PRC population will spur demand for high quality textile products, which will increase the demand for raw materials required for the production of these products.Combed yarn and compact combed yarn are examples of such raw materials, capable of producing textiles of finer qualities. Combed yarn and compact combed yarn are strong, fine and smooth yarn which are used to produce high quality textiles which are mainly used in garments of finer quality. Based on our industry knowledge, the domestic supply of compact combed yarn products is insufficient to meet domestic demand, as manufacturing of compact combed yarn products requires special technical knowledge. The successful commencement of production for combed yarn products has equipped the Group with the necessary technical know-how to enter into the production of compact combed yarn products.The expansion of the production facilities for compact combed yarn products with higher margin than our
existing combed yarn products is part of our Group’s growth strategy of focusing on higher margin differentiated functional products with strong cash flows that are able to continuously enhance the overall profitability of the Group and shareholder returns. - 7777777 appreciates the attitude of the management of CG Tech.
below is a quote from my blog posted on 01 Dec 06,
http://www.toptrader.blogspot.com/
Quote:
New product PSF
revenue = Yuan 18000/ton X capacity 10000 tons = yuan 180m =S$36m
GPM 30%, GP=36mX30%=S$10.8m
to start production 3Q2007
New product CCY (compact combed yarn)
revenue = yuan 31000/ton X capacity 7000 tons=yuan 217m=S$43.4m
GPM 32%, GP=S$43.4X32%=S$13.888m
to start production 4Q2007
Total GP for new products to be added=10.8+13.888=S$24.688m
total shares outstanding = 260m, eps for 2008 for newly added products portion only = (24.688X70%)/260 = S$0.066 for FY08,
eps FY06 0.108 tg 0.54-1.08 if pe=5-10
eps FY07 0.129 tg 0.645-1.29 if pe=5-10
eps FY08 0.222 tg 1.11-2.22 if pe=5-10
below is my revised estimates after a careful review,
New product PSF
revenue = Yuan 18000/ton X capacity 10000 tons = yuan 180m =S$36m
GPM 30%, GP=36mX30%=S$10.8m
to start production 4Q2007 (delayed 1 quater, see above)
New product compact combed yarn
revenue = yuan 31000/ton X capacity 7000 tons=yuan 217m=S$43.4m
GPM 32%, GP=S$43.4X32%=S$13.888m
to start production 1Q2008 (delayed 1 quarter, see above)
Total GP for new products to be added=10.8+13.888=S$24.688m
total shares outstanding = 260m
eps for 2008 for newly added products portion only = (24.688X70%)/260 = S$0.066 for FY08,
eps FY06 = 0.104 tg 0.52-1.04 if pe=5-10
eps FY07 = 0.104X1.333 = 0.139 tg 0.695-1.39 if pe=5-10 (note CG trading near lower band of the tg scope)
eps FY08 = 0.139X1.333+0.066 = 0.250 tg 1.25-2.50 if pe=5-10
Therefore, I upgrade CG Tech to strong strong buy.
CG Tech target price for 2007 is 1.39, implying an upside of 78% from current price of .78.
CG Tech target price for 2008 is 2.50.
Huat Arrh...
Labels: Individual Stocks
