30/05/2008
Results in line with expectation. CSC Holdings announced net income of S$43.2 (+400.3% yoy) mil on revenue of S$483.7 mil (+281.8% yoy) for FY08. Gross profit margin improved from 15.4% in FY07 to 20.2% in FY08, while net profit margin increased from 6.8% in FY07 to 8.9% in FY08. The Company proposed a final dividend of 0.5¢/sh, along with a special dividend of 0.4¢/share (tax exempt).
FY08 powered by doubling of capacity. FY08 saw the first full year contribution of L&M Foundation Specialists, a subsidiary that was acquired towards the end of FY07. The acquisition of L&M doubled CSC’s equipment fleet and capacity, which facilitated growth in both top and bottom lines. According to the management, margins were also stronger due to better economies of scale achieved. Management also attributed growth in FY08 to better pricing power amidst the current capacity crunch.
FY09 likely to be marked by geographical expansion. While growth in FY08 was largely fueled by fleet expansion, we expect CSC’s plans to expand geographically to become more apparent in FY09. While we expect results and profitability to continue strengthen into FY09, growth is more likely to be muted.
Maintain BUY, FVE S$0.45. We believe CSC is still an attractive buy at the current price, given the Company’s growth prospects, strategic positioning in the region, and the management’s prudent financial management. We maintain our BUY call on CSC, keeping to our DCF-derived FVE of S$0.45.
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