20151127-辉立证券-Healthcare_to_be_top_flagship_business_12页_1mb

报告摘要

MODERN Summary

Core Content

MODERN is a diversified company with a long history in the furniture manufacturing and distribution industry, spanning over 35 years. It offers a wide range of products for home, office, outdoor, kitchen, and bathroom use. The company has also expanded into other sectors such as retail space for lease and services, architectural design, and healthcare furniture. Its healthcare furniture business is expected to be a key driver of future growth, with plans to list its subsidiary MHC in the secondary market MAI within the next five years.

Key Financials

Revenue: Expected to grow to Bt4,261mn in FY16, down from Bt5,140mn in FY15, but up from Bt3,550mn in FY14.
Net Profit: Projected to be Bt397mn in FY16, up 11.8% from FY15, but down 10.8% from FY14.
EPS: Expected to be Bt0.53 in FY16, down from Bt0.93 in FY15.
Dividend Yield: Projected to be 4.0% in FY16, down from 7.1% in FY15.
P/E Ratio: Expected to be 15.8 in FY16, up from 8.9 in FY15.
P/B Ratio: Expected to be 1.9 in FY16, down from 2.1 in FY15.
ROE: Expected to be 12.68% in FY16, down from 24.32% in FY15.
ROA: Expected to be 8.12% in FY16, down from 15.37% in FY15.
Debt/Equity Ratio: Expected to be 0.52 in FY16, up from 0.60 in FY15.

Divestment of TPAC

In October 2015, MODERN sold its 48% stake in TPAC for more than Bt780mn. The proceeds are expected to be invested in the healthcare furniture business to capitalize on the growing trend of health consciousness. This one-off gain is expected to be recorded in 4QFY15, and the net profit is projected to increase by Bt345mn to Bt700mn.

Business Structure

MODERN operates in multiple business segments:

Furniture: Includes home and office furniture, materials, carpet, and wood floor.
Retail Space for Lease and Services: Operated by MTC.
Architectural Design: Operated by RFA.
Healthcare Furniture: Operated by MHC, which is expected to reach Bt1bn in revenue in the near term.
Plastic Packaging: Operated by TPAC, which MODERN has divested.

Revenue Breakdown

Furniture: Dominates the revenue with about 80% of total revenue.
Healthcare Furniture: Accounts for 4% of total revenue.
Retail Space for Lease and Services: Accounts for 100% of revenue from MTC.
Architectural Design: Accounts for 75% of revenue from RFA.
Plastic Packaging: Accounts for 48% of revenue from TPAC.

Target Customers

MODERN targets a variety of customers, including:

Architecture and designers
Residential project contractors and owners
Public agencies and state enterprises
Hospitals and educational institutions

Risk Factors

Persistent weakness in global and Thai economies may affect purchasing power and delay product deliveries.
New entrants in the furniture market may increase competition, affecting market share.

Earnings Review

FY15 Net Profit: Bt279mn, down 48.6% from the previous year, due to margin contraction.
FY16 Net Profit: Expected to be Bt397mn, up 11.8% from FY15, driven by sequential revenue growth and margin expansion.
3QFY15 Net Profit: Increased by 2.6% year-over-year and 47.5% quarter-over-quarter to Bt118mn, due to increased sales and effective cost controls.

Valuation and Investment Thesis

Valuation Method: DDM (Dividend Discount Model)
Target Price: Bt11.30/share for FY16
Rating: 'BUY' based on the company's ability to maintain growth in core profit and the growing demand for healthcare furniture.
Key Assumptions: Sales revenue excluding TPAC is expected to rise by 7.7% to Bt4,261mn, and gross profit margins are expected to expand to 32.4%.

Corporate Governance

The company's corporate governance rating is based on the Thai Institute of Directors Association (IOD) survey.
The results are from the perspective of a third party and not based on inside information.

Industry Group

MODERN is categorized under the Industrials sector, specifically in the Packaging sub-sector.

PSR Rating System

Capital Gain: If greater than +10%, recommend 'Buy'.
Capital Gain: If between 0% to +10%, recommend 'Neutral'.
Capital Gain: If less than 0%, recommend 'Sell'.

Remarks

The recommendations are not solely based on quantitative return bands but also include qualitative factors such as risk reward profile, market sentiment, and price catalysts.