PTB updated Nov 2019

Key Summary

-  We upgrade PTB from OUTPERFORM to BUY as we raise our target price by 19% due to a rollover of our valuation to YE2020 and increased 2021F-2022F NPAT-MI; this is despite trimming our 2020F NPAT-MI forecast by 3%, mainly due to higher interest and SG&A expenses.

-  We raise our 2021F-2022F NPAT-MI by 11% on average as (1) we add the new quartz business to our forecasts and (2) selling prices of PTB’s residential project exceed our projections by ~25%.

-  We expect quartz will start generating revenue in mid-2020 and contribute 8% to gross profit in 2022F, partly bolstering our forecast of a 2020F-2022F CAGR of 17% for the stone segment.

-  In addition to a rising contribution from quartz business, our forecast of accelerating EPS growth in 2020F-2021F is premised on (1) the fact that 2019 EPS is diluted by a 5:1 rights issue carried out in Q2 2018 and (2) a projected contribution from the residential real estate project in 2021.

-  PTB looks attractive with a 2020F PER of 6.9x vs a 5Y average peer TTM PER of 10.7x. Still, we maintain our target price at a 20% discount to our SOTP valuation given PTB’s conglomerate structure, new foray into real estate, weak free cash flow and limited information disclosure.

-  Potential downside risks to our positive view: slowdown in domestic construction activity; new tariffs on Vietnamese wooden furniture; sluggish real estate and quartz execution.

VCSC Research