Tee International -Developing its Third Engine?- SIAS Research Intrinsic value: S$0.485 Main Activities TEE International Limited is a reputable engineering player specialized in the provision of infrastructure, construction and rebuilding, redevelopment and system integration services. The company’s subsidiary, TEE Land has more than 20 property development projects in the region. TEE is also looking to develop its infrastructure and recurring division. TEE International Limited (TEE) recently posted several positive updates. Firstly, the company announced S$49.1m value of projects from established clients such as SMRT, HSBC, Singapore Institute of Technology and others. These new contracts help to boost its engineering order book to S$270.1m. Secondly, TEE’s 49% owned Global Environmental Technology Co., Ltd (GETCO, a waste water treatment company in Thailand) entered into a consortium with Cisco Engineering and Lam Water Solution to manage and control the water level at Makkasan Water Catchment area. The contract is worth approximately S$8.61m with a contract term of three years. TEE’s effective interest is 14.7%. Lastly, the company entered into an MOU with Pioneer Environmental Technology to evaluate the possibility of investing in a waste water treatment plant in Huzhou, China. Back in November 2012, TEE announced a MOU to develop and operate a fully integrated cement plant in Myanmar. This proposal is undergoing feasibility study now. The company also has three other recurring businesses now, namely Nordam, Rom Klao and GETCO, which generated combined attributable profit of S$3m+ annually. Following the listing of TEE Land and examining the recent announcements, we reckon that TEE is looking to develop its infrastructure and recurring income division. The company is likely to evaluate its recent MOUs and carefully select the appropriate projects to go into. We believe TEE will place projects that it has prior experiences in at higher priority. The growing of the infrastructure division is likely to take some time and we reckon that TEE will mimic what it had done for TEE Land, when the division is big enough. The engineering business is operating as per usual and TEE has previously acquired stakes in some telecommunication engineering companies in Thailand. The company is also looking at big-sized contracts in overseas markets. Following the listing of TEE Land, we are now valuing TEE based on SOTP, with the engineering and infrastructure business priced at 8.8X P/E. Maintain Increase Exposure. Financial Highlights (Y/E May) S$ m FY11 FY12 FY13F Revenue 253.0 143.6 159.8 Gross Profit 29.4 31.2 17.6 Earnings 16.4 19.1 11.0 EPS (S cts) 5.2 5.2 3.0 Source: SIAS Research Estimates Key ratios (FY13F) PER 12.0 P/BV 1.37 ROE 11.4% Gross Debt/Equity 1.26 Current ratio 1.86 Source: SIAS Research Estimates Indexed Price Chart Green (FSSTI) White (TEE) Source: Bloomberg 52wks High-Low 49.0 cents/ 21.2cents Number of Shares 466m Market Capitalization S$162.9m
Posted on: Thu, 27 Jun 2013 03:00:01 +0000
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