Serial System

Serial System: Unrated report by CIMB, citing management’s new cost efficiency measures producing encouraging results. Given its extensive Asia-Pacific distribution network, Serial could appear on competitors’ M&A radar once revenue reaches the US$1b mark. House estimates Serial’s fair value at $0.213 (based on consensus CY15 EPS of 2.5 Scts) and 8.5x CY15 P/E (its 4-year historical average forward P/E). Management paid out approximately 50% of net profit as dividends in the past three years, which translates into dividend yields of 3.7-5.6%. CIMB believes that management will maintain a dividend payout ratio of 40-50%. Based on consensus forecasts, Serial’s FY14-15 yield would be 5-7%. The stock’s re-rating catalysts include potential M&As and faster-than-expected earnings contribution from newly-acquired companies.