Tai Sin Electric Cables

Tai Sin is poised to benefit from the construction boom in Singapore in thenext few years. The Building & Construction Authority (BCA) estimatesconstruction demand for 2007 at S$19bn-22bn, attributed to the rise inresidential and commercial demand due to the current property boom. Moreoffice space and hotels are also expected to be developed to meet marketdemand. Going forward, Tai Sin is expected to grow revenue and pretax atCAGR of 11.1% and 15.8% respectively for FY07 to FY2010. We believe Tai Sincan trade up to 9x FY08 P/E. This translates into fair value of S$0.635, offeringupside potential of 41% from the current price. We recommend a Trading Buy.Leading electric cable producer in Singapore. Incorporated in 1980 and listed on theSGX in 1998, Tai Sin’s main business is in manufacturing of electric cables. It iscurrently the second largest producer (total six domestic players) in Singapore, withabout 20-30% market share. It has two main business units :-1. Manufacturing - This cluster comprises mainly its leading electric wires and cablesmanufacturing activities in Singapore and Malaysia. It has recently set up a new plantin Vietnam, which commenced operation in September 07.• Its factory in Singapore produces about 600mt of cables per month and runs atutilisation rate of about 80%. By end of 07, production should be increased to1,000mt per month, with the addition of a new production line. In Malaysia,production is about 400mt per month at utilisation rate of about 60% while itsVietnam plant can produce about 100mt per month. It is a deliberate measure to runat less than full capacity in order to be able to take on urgent projects. Apart fromthis core activity, this cluster is also involved in lamp manufacturing and assembly ofswitchboards.2. Distribution – This unit operates a highly successful distribution network distributingelectrical and control products, devices and accessories and solutions to a wide rangeof local and regional industries. Its strength lies in its ability to source for specificitems based on customers’ requirements.�� Leveraging on construction boom. Singapore’s construction industry is recoveringstrongly after a decade of being in the doldrums. The Building & ConstructionAuthority (BCA) estimates construction demand for 2007 at S$19bn-22bn, attributedto the rise in residential and commercial demand due to the current property boom.More office space and hotels are also expected to be developed to meet marketdemand. This bodes well for Tai Sin as wires and cables are needed for these projects.�� Expanding into developing markets. Tai Sin has recently completed Phase 1 of itsmanufacturing plant in Vietnam. It has also established a Dubai branch office in 2006to expand its presence in the Middle East. By expanding overseas, Tai Sin is able todiversify risk from the cyclical nature of the construction industry in Singapore.�� Strong growth since 2003. Tai Sin has been consistently reporting strong growthsince 2003, before the construction sector started to pick up. Revenue CAGR overFY03 to FY07 was 43.5% while pretax CAGR during the same period was 89.9%.Going forward, Tai Sin is expected to grow at revenue and pretax CAGR of 11.1%and 15.8% respectively for FY07 to FY2010.