We caught up with Karin Technology for a quick update recently. As expected, all its pistons were firing in 1H08 and based on the current business outlook, management believes that the strong growth momentum is likely to continue in 2H08. Besides good performance from all its business units, Karin has also expanded both in terms of markets and products. As a result, its business is more diversified with more sales coming from China, management believes that the group as a whole is better equipped to handle any potential shocks like a recession in the US. As before, we view Karin as a ticket to ride on the growing consumerism in China, and an inexpensive one at that, given that Karin currently trades at just 4.4x FY08F earnings. Our fair value estimate of S$0.44 is based on an undemanding 8x FY08 PER and already offers >80% upside from here. Coupled with an attractive dividend yield of 8.3% expected for FY08, we retain our BUY rating.
All pistons firing in 1H08.
We caught up with Karin Technology for a quick update recently. As expected, all its pistons were firing in 1H08 and based on the current business outlook, management believes that the strong growth momentum is likely to continue in 2H08. Besides good performance from all its business units, Karin has also expanded both in terms of markets and products. As a result, its business is more diversified with more sales coming from China. Management believes that the group as a whole is better equipped to handle any potential shocks like a recession in the US.
IT distribution continues to power ahead.
According to management, its IT distribution business has done very well in 1H08, boosted by strong demand for consumer electronics in China, especially for mobile phones. In addition, Karin saw robust growth in the Industrial Material segment, mainly boosted by its recent acquisition of IMI Kabel. Karin had earlier guided for the 70%-owned unit to post S$5m revenue for 1H08 and S$10m for FY08. Management also revealed that it is venturing into a new business segment – LCD modules – although it expects the bulk of contribution to come in FY09.
IT infrastructure building up nicely.
Its IT infrastructure business has performed exceedingly well, aided by its investments in Karltec, Gamatech and KARFID. The business division further benefited from several large orders from the financial services sector, as well as the securing of new businesses like the distribution rights for Samsung LCD monitors. Growth in 2H08 is expected to remain robust, driven by continued IT expansion of MNCs in China. We understand Karin is also in the midst of securing a big IT deal – one which management believes will not only boost its revenue but also reputation as an established IT infrastructure player.
Inexpensive ticket to China’s growth.
As before, we view Karin as a ticket to ride on the growing consumerism in China, and an inexpensive one at that, given that Karin currently trades at just 4.4x FY08F earnings. Our fair value estimate of S$0.44 is based on an undemanding 8x FY08 PER and already offers >80% upside from here. Coupled with an attractive dividend yield of 8.3% expected for FY08, we retain our BUY rating.
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