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SP Chemicals (S$0.795) - Deserves re-rating
We expect SP Chemicals to report sterling 4Q06 EPS growth of 61% yoy as its ASPs
remained firm against earlier anticipation of a decline. FY07 is looking brighter, on
expected steady demand with some new customers locked in. A new capex budget of
Rmb280m for FY08 should increase its capacity by 50% in 1Q08. We have raised our
FY06-08 EPS forecasts by 4-72%, after assuming higher ASP assumptions and margins,
and accretion from the aggressive 2008 expansion. Valuations are compelling at 4.8x
CY07 P/E and 2.7x CY08 P/Es, against a projected 3-year EPS CAGR of 42%. SP
Chemicals warrants a higher valuation and we have raised our target price to S$1.08
(6.5x CY07 P/E) from S$0.80 (5.5x CY07 P/E). This still puts it at a 50% discount to the
13x commanded by another well-managed company, Jiutian Chemical.
FY06-08 EPS forecasts by 4-72%, after assuming higher ASP assumptions and margins,
and accretion from the aggressive 2008 expansion. Valuations are compelling at 4.8x
CY07 P/E and 2.7x CY08 P/Es, against a projected 3-year EPS CAGR of 42%. SP
Chemicals warrants a higher valuation and we have raised our target price to S$1.08
(6.5x CY07 P/E) from S$0.80 (5.5x CY07 P/E). This still puts it at a 50% discount to the
13x commanded by another well-managed company, Jiutian Chemical.
and accretion from the aggressive 2008 expansion. Valuations are compelling at 4.8x
CY07 P/E and 2.7x CY08 P/Es, against a projected 3-year EPS CAGR of 42%. SP
Chemicals warrants a higher valuation and we have raised our target price to S$1.08
(6.5x CY07 P/E) from S$0.80 (5.5x CY07 P/E). This still puts it at a 50% discount to the
13x commanded by another well-managed company, Jiutian Chemical.
(6.5x CY07 P/E) from S$0.80 (5.5x CY07 P/E). This still puts it at a 50% discount to the
13x commanded by another well-managed company, Jiutian Chemical.
13x commanded by another well-managed company, Jiutian Chemical.