Stock With Momentum: Boilermech

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This article first appeared in The Edge Financial Daily, on November 25, 2015.


Boilermech Holdings Bhd (-ve)

SHARES of biomass boiler manufacturer Boilermech (Fundamental: 2.3/3, Valuation: 0.9/3) rose as much as 8.8% in early trading, before closing up 0.9% to RM1.15 yesterday.

This follows its proposed acquisition of a 60.23% stake in Teknologi Enviro-Kimia (M) Sdn Bhd (TEK), a water treatment company, for RM14.7 million on Monday.

Based on TEK’s latest audited accounts ending December 31, 2014, the acquisition price valued the company at only 5 times P/E. For 2014, TEK posted revenue and net profit of RM30.2 and RM4.9 million, respectively.

Boilermech mainly manufactures and repairs biomass boilers, which are used to supply steam in power generation, sugar mills and palm oil mills. Export accounted for some 62% of its sales in FYMarch2015.

For 1HFY16, revenue fell 9.1% y-y to RM129.2 million, due to lower sales of boilers. Meanwhile, net profit declined 8.9% to RM19.6 million, on higher operating expenses.