XMH

XMH: XMH hopes for a turnaround in operations via its recently-acquired Mech-Power Generator. The new subsidiary is Singapore’s leading manufacturer in the assembly, sale and service of diesel-powered generators, and receives the bulk of its revenue primarily from Singapore. XMH hopes to ride on S'pore's economic and infrastructure growth over the next few years, given that every building of more than 4 storeys is required by law to have standby generator sets. In its latest 2QFY14 results, Mech-Power contributed 19% to group's revenue of $27.1m, which fully mitigated the 15% decline of its distribution and aftersales segment. Over the five-month period prior to Oct '13, XMH went through challenging times when the Indonesian rupiah slid over 10% from 9,700 IDR/USD to over 11,000. This caused vessel owners and operators in Indonesia to delay taking delivery of their engines in the hope of reducing their currency exposure, affecting XMH's diesel engine business. With the continued depreciation of IDR/USD to the current 12,237, we do not foresee a near-term recovery on its Indonesia marine business. Having said that, management provided an indication of green shoots for coal demand from China, which may lead to a pick up in demand of tugs and barges for coal transportation. This comes in support of Indonesia's projected 5.6% GDP growth for 2014. Balance sheet is at a healthy net cash position, which puts XMH in a good position to pursue further acquisition activities to expand its business. At $0.34, XMH trades at an annualized 2QFY14 P/E of 15.3x and 2.5x P/B. Latest broker recommendations: OSK DMG has a Buy rating with a lower TP of $0.50 (from $0.54)