The research arm of AmInvestment Bank Bhd (AmInvestment) pointed out that the stock is trading at a premium to its peers on the back of its strong market share in the boiler industry, proven track record and roster of blue-chip clients.
However, it noted that despite the aforementioned attributes, the research team pegged a ‘hold’ recommendation on the group as it believed that its valuations are stretched and the group’s earnings growth are still in the early stage of recovery.
Nevertheless, it pointed out that some of its positive attributes include its range of boilers with different grates and prices.
“Backed by a proprietary combustion technology, the boilers are efficient and reliable. Boilermech’s market shares are estimated at 40 to 50 per cent in Malaysia and 30 per cent in Indonesia.
“The group is the second largest boiler manufacturer in Indonesia presently,” it noted.
Aside from that, it pointed out, “The group is on its way towards becoming an integrated player in the palm oil mill chain. With its water treatment and biogas operations, Boilermech is poised to take advantage of the MPOB’s potential requirement that all palm oil mills must have biogas facilities in the future.
“Currently, most of Boilermech’s earnings are from the manufacturing and installation of boilers.”
The research team also highlighted that the group is well-positioned to capture a slice of the biogas market in Sarawak.
“According to the MPOB, there are 76 palm oil mills in Sarawak currently,” it said.
Overall, AmInvestment said, Boilermech’s balance sheet is healthy as the group has net cash of RM55.8 million as at end-March 2017 while its gross borrowings were a small RM8.3 million.
It also noted that the capital expenditure (capex) cycle of the plantation industry is just starting to pick up after being affected by the downturn in CPO prices in 2014 and 2015.
Boilermech manufactures boilers mainly for palm oil mills.
http://www.theborneopost.com/2017/07/10/analysts-boilermech-a-leading-palm-oil-mill-boiler/
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