MORNING CALL: 29/11/23

CGS-CIMB Research believes the worst is almost over for Engtex Group

Transcript

00:00 At Zeng Tech's group this morning, CJSCIMB Research upgrading the counter to add from

00:06 hold.

00:07 With a higher target price of 82 cent from 58 cent previously, it says the worst is almost

00:13 over.

00:14 The stock last closed at 68.5 cent.

00:17 So the key catalyst for the water sector is the proposed water tariff hike to be tabled

00:22 by the cabinet soon.

00:23 If the tariff hike materialises, it would accelerate water infrastructure upgrade projects,

00:29 benefiting Angtex.

00:30 Meanwhile, local steel and pipe prices have largely stabilised in the past four months,

00:36 which may provide room for margin expansion from 2022's lows and better earnings visibility.

00:42 As of October, Chinese iron ore pricing has risen 23.8% since May, potentially translating

00:49 into higher local steel prices and providing a short-term boost to Angtex's margins,

00:54 given the estimated two to three months of raw material inventory kept on hand.

00:59 Operationally, the company has performed within expectations.

01:03 But CJSCIMB warns higher non-deductible tax may drag Angtex's profits in the near term.

01:09 The research house raised its FY24 and FY25 core EPS by 1.1% and 5.8% respectively, but

01:17 it lowered its FY23 EPS forecast by 16.2% on higher tax expenses.

01:23 It said it upgraded its recommendation to add in view of the improved operating environment

01:29 and higher earnings outlook.

01:31 Quick look at consensus.

01:32 According to the latest Bloomberg data, aside from CJSCIMB, there's Kenanga Research with

01:38 an outperformed rating and target price of 77 cent.

01:41 That's 2 buys with an average target price of 80 cent.

01:45 Angtex ended trading at 68.5 cent.

01:48 So that implies a potential return of about 17%.

01:52 Thanks for watching.