Dream Int’l (1126.HK) 2009 interim results

The 2009 interim results of Dream Int’l (1126.HK) came out last Friday night and was better than I expected, with sales growing 13% YoY and gross margin being very strong at 27% (up from 13% in the first half of 2008).

The Company also booked a $21m gains from disposal of Jiangsu plant (originally thought it would be booked in second half of 2009) and paid 6% effective tax rate (thought it would be 15%).

So overall net profit was $38m, which is a great number. The Company’s balance sheet is very strong with $200m cash and $50m debt, and it also seems to be managing its working capital well.

I expect the Company to make another $30-35m in net profit for second half of 2009, bringing total net profit in 2009 to $68-73m. And I anticipate that the Company will resume paying dividends for full-year 2009 (after skipping for 3 years) of 0.05/share.

Given the strong set of results, I think the Company’s share price should reach $0.60 (1x P/B) within two months, and $0.80 within a year (7x P/E, 6-7% dividend yield).

RECOMMEND BUY NOW AT $0.42. TARGET $0.60 BY NOVEMBER 2009 AND $0.80 BY SEPTEMBER 2010.

p.s. you may download the interim report from: http://www.dream-i.com.hk/tc_chi/announce.html