JEP

JEP: Counter surges intra-day, after crossing its $0.05 resistance in the morning session. Recall last week's posting: JEP: ($0.047) Disposal of loss-making Thai subsidiary paves way for further earnings recovery In late Nov, JEP Holdings entered into an agreement to dispose all the assets of JEP Precision Engineering Thailand (JEPT), which comprises freehold land, a factory building and machinery in Thailand for Bt41.8m ($1.67m), against its book value of Bt36.1m ($1.44m). Subsequently, the loss-making subsidiary will be dissolved and liquidated. The deal is expected to be completed around the end of this month. The disposal proceeds will be used to pare down JEP's total debt from $7.0m to $5.3m, thereby reducing the group’s gearing from 17.4% to 13.3%. Formerly known as Alantac Technology, JEP is a precision engineering firm that manufactures parts mainly for the aerospace and oil & gas industries. Over FY11 to 1H13, JEP’s gross profit margin vastly improved from 4.8% to 14.8%, mainly due to the aerospace segment. Having successfully completed several production tests in FY12, JEP has since moved to the actual production for the component parts used in new generation aircraft such as the B787, A350 and A380. A further ramp up in production of these new products may underpin JEP’s growth going into 2014. Over the past 12 months, JEP paid out 0.2¢ in dividends, which translates into a 4.3% yield. Management has stated its intention to pay regular future dividends from earnings. At $0.047, JEP trades at 1H13 annualized P/E of 23.5x and 1.1x P/B, broadly in line with its historical average of 25.5x P/E and 1.0x P/B.