What’s on the table
Gems TV Holding Limited (S$0.43) - No total loss of glitter
In spite of poor 1Q08 results, we believe Gems TV can turn around on the back of organic growth in dynamic consumer markets and cost rationalisation. Despite near-term economic challenges in its key new markets (US, Japan and China), its longer-term prospects remain intact, in our view. Surging costs could be turned into an opportunity. Our sensitivity analysis suggests that a 100bp improvement in COGS could boost its net profit by 10%. While we remain upbeat on its longer-term outlook, we have cut our EPS estimates for FY08 to US$0.02 (-38%) and for FY09 to THB0.04 (-35%). As a result, we have lowered our end-CY08 target price from S$1.32 to S$0.78, now based on 13x CY09 P/E (discount to our previous 15x target) and 7x CY09 EV/EBITDA. With a debt-free balance sheet, strong net cash and the potential to offer a 3-year EPS CAGR of above 100%, Gems TV is in a position to stage a comeback, in our view. Maintain OUTPERFORM.
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Trading Ideas - Lian Beng Group
Link to full report including important disclosures
http://www.bestsharing.com/files/6X2OjNe370813/Daybreak-231107.pdf.html
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