Inter-Roller Engineering
An unexpected hard landing
Fully Valued (Downgrade) S$1.13; Price Target : 12-Month S$ 1.00 (Prev S$
1.15)

Story: IRL reported 1H07 results that were below expectations. Excluding
net gains (DBSV estimate) on sale of investment property S$10.6m, net
earnings at half-time declined by 31% y-o-y to S$9.2m on a flat topline of
c. S$77m. A S1ct dividend was declared for the quarter.

Point: While the Group is confident of securing more orders in the second
half of 2007, a delay in the award of tenders would affect the Group’s
turnover in the 2nd half of the year with most of these orders being
carried out in 2008. To reflect lower order wins and higher costs, we have
cut our core earnings estimates for FY07 and FY08 by 24% and 13%
respectively.

Relevance: The stock has risen by over 25% since February and is currently
trading at c.14x FY08 earnings. With our target price now at S$1, based on
12x FY08 earnings, following our lowered earnings estimates, we are
downgrading the stock to a Fully Valued.


我刚刚割肉。由赚到赔，要好好反思一下。