TABREED TNI report update

[sharewadi]

TNI Investment Research published a report update about National Central Cooling (TABREED) called "Tabreed: Chilling in the heat". See also TNI Tabreed report from March 2008, on which this is based.

See also Tabreed 2Q08 results.

TNI 14 August 2008:

Good second quarter results with significant growth Tabreed’s second quarter results were a marked improvement both sequentially and over the same period last year. All major segments recorded solid growth as Tabreed gears up to expand its capacity in the UAE. Total revenues for the second quarter amounted to AED 173m, the highest Tabreed has ever declared. Over the same period last year, revenues grew by 42% while QoQ growth stood at an impressive 39%. Net profit for the second quarter was AED 23.4m, an 85% increase YoY and 135% QoQ. Margins headed for improvement The sudden rise in staff costs in the first quarter threatened to depress Tabreed’s margins in 2008. However the solid revenue growth and controlled costs led to stable margins in the second quarter. Operating margin stood at 30% compared to a quarterly average of nearly the same level. Similarly the second quarter net margin of 13.6% was in line with the historical average of 13%. If capacity increase is achieved on time, we believe these margins could improve significantly over the next few years. Share price performance not flattering Tabreed’s stock price is up 5.8% YTD compared to the DFM’s performance of -14.4%. In the last two months, the stock has come down by 20%. There is a general slowdown in the regional markets following the slump in global markets. Moreover Tabreed has always been strongly correlated with the market. Target price maintained at AED 2.86 With very little changes to our profitability forecasts, we maintain our Underpriced rating on Tabreed and reiterate our target price of AED 2.86. This is at a 40% upside to the current price of AED 2.05. We continue to believe in Tabreed’s strong position in the UAE market and its long-term growth story. However as we have mentioned repeatedly, leverage remains a key issue as finance costs can potentially compromise margins.

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