Tuesday, April 21, 2015

Boilerm ... Expensive Valuations

It is looking at new areas of expansion in the palm oil and agriculture-based industries.

Boilermech is a biomass boiler manufacturer, serving mainly the palm oil milling industry. The bulk or 90% of the company’s earnings comes from this sector.

Waste water from the palm oil industry is an increasingly hot topic, an area it can venture into.

It provides boiler technology and energy solutions to the palm oil industry focusing on their solid waste.

Chia is the son of Boilermech chairman, Dr Chia Song Kun who is more well known in the corporate circle as the founder of food and agriculture group, QL Resources Bhd. QL Resources is Boilermech’s major shareholder with a 40.7% stake. QL Resources had taken up this strategic stake prior to the stock’s listing on the ACE Market in 2011.

Boilermech’s other substantial shareholders are Leong Yew Cheong, the company’s managing director with a 15.1% stake and director Wong Wee Voo who has an interest of 8.4%.

While palm oil mill owners are Boilermech’s main customers, the company also designs and manufactures boilers for other agricultural-based processing industries, such as sugar milling and rubber-based manufacturing.

Another area it has ventured into that offers growth opportunities is independent power producers (IPPs). With more independent power producers coming on stream in the region that supply power using renewable energy, this is an area of growth for it to diversify its business mix.

Boilermech has cash totalling RM74.5mil as at end-March 2014.

At rm1.58 it is trading at a trailing 12 month price earnings ratio of 19.84 times and 6.58 times book.

As at June 2014 its order book is in excess of RM310mil and this will keep it busy for the next one and a half years from June 2014.

In terms of revenue, local sales contributes 48% while the bulk of export sales come from Indonesia which contribute 42% to revenue. The balance is derived from countries like Thailand, Philippines and Papua New Guinea, which are in the agricultural belt of the Asean region.

It is well-positioned in Indonesia.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.