Armstrong Industrial's net profit beats analyst's prediction by 15%

But earnings forecast for FY14 slashed by 2%.

According to CIMB, 4Q12 core net profit came in 15% above our expectation with key variances coming from better-than-expected gross margin, offset by higher-than-expected opex.

CIMB adds, with the incorporation of this set of results, its FY14 estimate is reduced slightly by 2%; it also introduces FY15 estimates. Its target price of S$0.29 is still pegged at 8x CY14 P/E (about its 5-yr average). 

Here's more:

Sales, which grew 6% yoy, were 12% below our expectation (vs. our slightly more bullish expectation for the automotive segment). However, with better-than-expected gross margin, gross profit was in line with our estimates.

On the operating level, with slightly higher opex and hedging losses due to the rapid weakening of the Japanese Yen, offset by insurance claims, operating profits came in lower than our forecast.

On a core net profit basis, Armstrong still beat our expectation by 15%. Free cash flow also remained positive, as expected.

Armstrong declared a dividend of 0.6 Scts, which was below the 2 Scts we expected. We believe this was done to conserve cash for capex in Malaysia, Thailand and China. In view of this, we also reduced our dividend assumptions for FY13-14 to match an assumed payout ratio of about 40%. 

We believe Armstrong should be able to pay more dividends after the disappointment in FY11 and FY12.