KUALA LUMPUR (Dec 3): MIDF Investment Bank Bhd Research has upgraded Daibochi Bhd to “Buy” at RM2.27 with a higher target price of RM2.60 (from RM1.52) derived from 19.0x PER of FY20F EPS of 26.3 sen following the revision in earnings assumption.
In a note today, the research house said its valuation of 19.0x PER is unchanged and is based on Daibochi’s long-term average PER.
It added that Daibochi’s 1QFY20 results surprised on the upside with record topline and net profit at RM11.3 million.
It said better operational efficiency lifted bottomline, and that Daibochi’s earnings estimates for FY20E/FY21F had been revised by +71.1%/+53.7% respectively to RM45.0 million/RM45.8 million.
MIDF Research said the upgrade was due to the better than expected synergy between Scientex Bhd, Daibochi and Mega Printing and Packaging (MPP), which have lifted overall profitability.
“We believe that further upside may come from the full integration of MPP into the group as the acquisition of MPP has only been completed since August.
“Downside risks include slower than expected expansion, spike in raw material prices and setbacks from integration of the companies. Dividend yield is expected at 2.4%,” it said.