Target Price: NA
Rating: Not Rated
Initial View: Positive
下面是方便网友摘抄出来的 有兴趣的可以一看 by Kim Eng Gregory Yap
♦ Entering the prime time
After years of developing its auto business (since 1998), Armstrong is entering the most
sustainable part of its growth cycle. Between 2002 and 2006, earnings grew by a CAGR of
64%. The fact that Armstrong will report its first quarterly results this evening, even though
it is not required to do so, suggests that Q1 YoY growth could be even stronger than its
past performance. The market has taken some notice in recent weeks (the stock has risen
from below S$0.20 to almost S$0.30) but over the next 12 months, at 9.0x estimated
2008F earnings, we believe it is still attractive.
♦ Hard to believe foam & rubber parts can be a competitive edge, but yes!
Armstrong specialises in eliminating noise, vibration and harshness (NVH), which are key
design and performance elements in many products. For instance, NVH is a vital part of
the brand image of a vehicle. Consumers expect a Lexus to be cocooned from the road, a
BMW to have a certain handling and a Harley to have that distinctive engine rumble. A
rubber hose does not make noise on its own but it can cause quite a racket when in
contact with other parts. OEMs are hence very concerned with getting these intangible
characteristics just right.
♦ Armstrong has a widely diversified customer base
Armstrong has more than 300 customers with only one single customer exposure (15% of
sales from Seagate/Maxtor in 2006). All the rest is not more than 5% each. In 2006,
Consumer Electronics took the largest revenue chunk of 34%, with Office Automation and
Data Storage at 23% and 18%, respectively. Auto sales have grown the most (from less
than 10% before 2000 to 23% of sales now) while the rest have mainly fallen in share.
Briefly, Armstrong supplies products to top-tier auto parts suppliers (Denso, Sanden, Hella
and Magna Donnelly) and OEM names (VW, Peugeot, Ford, GM, BMW, Mercedes Benz
and Audi, among others).
♦ But it’s the Automotive biz that’s on the steepest growth path
In recent years, auto sales have been growing the fastest (see Figure 1) and we expect the
growth to be sustained in the next few years. Last year, Armstrong clinched a contract to
supply door shield systems for two Peugeot models sold in China. The program will
contribute fully this year. In early 2007, it also started to supply mirror gaskets to a Ford
parts supplier in Australia, a contract worth S$14m over seven years. Armstrong is also
working with Peugeot on another five models. With auto parts outsourcing rising fast in
Asia (Armstrong is well positioned with six plants in China and four in Thailand), we
anticipate many opportunities in this area. M&A in this area could also boost growth
momentum.
♦ Attractively priced for the growth potential
We believe Armstrong should have no problem achieving 25-30% annual profit growth in
the next few years. Current valuations of around 8x 2008 earnings do not look expensive
relative to regional comparables that currently command double-digit PE multiples, some of
which are heavily geared, unlike cash-rich Armstrong.
