KUALA LUMPUR (July 30): Signature International Bhd shares rose 3.07% in early trade to a five-year high today, after TA Securities Holdings Bhd said the kitchen cabinet manufacturer is expected to register a growth of more than 100% year on year (y-o-y) in financial year 2015 (FY15).

At 10.36am, the shares rose 9 sen to RM3.02. However, trading volume was thin at 753,700 shares done.

Year-to-date (YTD), the stock has risen 60.64%, bucking the YTD trend of the KLCI, which has registered a decline of 3.39%.

In its report today, TA Securities Holdings Bhd said the research firm expects Signature, which is expected to announce its fourth quarter of FY15 (4QFY15) results next month, to see its FY15 profit double to between RM38 million and RM 42 million.

The research firm said the growth will be underpinned by higher revenue from projects, retail sales growth and margin improvements.

The research firm also noted that based on the company’s unofficial policy of paying out at least 30% of earnings as dividend, Signature’s FY15 dividend yield will likely be more than 2.7%, as the company is expected to propose a final dividend of at least 4 sen per share in the 4QFY15, in addition to the first interim dividend of 4 sen per share.

TA Securities said Signature’s earnings for the nine months of FY15 (9MFY15) had already exceeded the core profit of financial year 2014 (FY14) by 31%.

“As such, Signature’s FY15 performance is expected to take out the record profit of RM23.8 million achieved in FY14, comfortably,” the report read.

This is despite Signature’s order book of RM150 million as at June 2015, representing only 60% of the research firm’s estimated project revenue for financial year 2016 (FY16).

However, TA Securities said it was unperturbed by Signature’s order book, saying the group has close to RM400 million in its current tender book to support future earnings growth.

Some of the potential jobs in the tender book include a kitchen project of Country Garden @ Danga Bay development which is to be dished out as soon as the development, which was launched in August 2013, is expected to be completed and handed over in 2016, the research firm said.

TA Securities also said that Signature is expected to bid for kitchen works of Phase 2 of the Battersea Power Station project, which was launched in February 2014.

However, given that Battersea Phase 2 is expected to be completed by 2017 to 2018, the project is expected to be awarded in 2016, the research firm said.

TA Securities maintained its “Buy” recommendation with a target price of RM3.65 per share, based on unchanged 10 times FY16 earnings per share (EPS), given the favourable change in the property trend, which bodes well for Signature’s future earnings.

Signature (fundamental: 2.3; valuation: 2.1) has a market capitalisation of RM351.47 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)