The outlook is stable to positive. The tone of management commentary is now more upbeat compared to previous quarters, mentioning that the recovery in the US economy could have a positive impact on the aluminium industrial product business. This refers to the aluminium frames for container refrigeration units. We note that in the recent 3Q 2017 earnings presentation by United Technologies (NYSE: UTX), commercial sales for Transport Refrigeration was “up high single digit”. This was an improvement over 2Q (“up low single digit”) and 1Q (“down high single digit”).
Domestically, Nam Lee could potentially benefit from the pipeline of infrastructure projects and spate of collective-sales. Any revenue recognition though, would probably only be at least two years from now, coinciding with the tail-end of the projects.
Maintain Buy; higher target price of $0.56 (previously $0.51)
Our target price represents an implied 11.1x FY18e forward P/E multiple and 0.96x FY18e forward P/B multiple. The 2.0 cents dividend offers an attractive yield of 5.1% based on the last close price of $0.395. We currently forecast 2.5 cents dividends for FY18e and maintain our view of Nam Lee as a yield-play.