by winston » Wed Dec 16, 2009 10:43 am
From Phillips:-
Valuation
Currently, there is no direct competitor in the market producing similar products. By referencing peers that manufacture household and personal care products like 1044 HK and 1338 HK, these are now trading around 33.9 times 2009E earnings per share and 27.4 times 2010E earnings per share.
Considering the smaller company size but higher profit margin, we estimate the 2010E P/E of Carpenter Tan reasonably should be 12x. 12-month target price is $3.32.
Risk
1) Return of products by the franchisees which makes the revenue lower-than-expected.
2) Fluctuation in the costs of raw materials.
3) Dependence on franchise shops, and the possibility that franchisees do not renew the franchise agreements with the company upon expiration.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"