Sound Global

Sound Global: 1H13 revenue was up 25% YoY and recurring earnings rose 1.8% YoY. Its earnings came in within expectation and were dragged down mainly by higher financing costs resulting from its USD 150mn senior notes. Gross profit margin (GPM) remained steady at 30.1%, similar to its historical average. Net gearing was 10.1%, within management’s comfort level. The EPC order book remained stable in 1H13, and SCB expect more contribution from the BOT/O&M segments, which could push margins higher, in the range of 50-60%, in our view. In June, SGL’s chairman submitted a letter of intent to delist the stock from the Singapore Stock Exchange, which we view as a positive. Trading at 8x 2014E PER, its valuation appears undemanding compared with peers. SCB believe SGL’s expansion into the BOT segment could act as a catalyst. Overall, house maintains Outperform with $0.86 TP.