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4 July 2002
CityAxis Holdings
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Price: S$0.28

Established Player Leaping into China

CityAxis provides interior fit-out services to high-end commercial clients. Services include planning, design and co-ordination of various aspects of interior fit-out. We recommend a SUBSCRIBE for the following reasons:

Established player with strong management and design capabilities. CityAxis has completed over 270 projects since its inception in 1995. Its ability to manage projects with complex design and IT requirements set it apart from some of its competitors.
Demand from MNCs drives growth. CityAxis has provided services to the Singapore and/or Malaysian offices of MNCs such as Standard Chartered Bank, Shell, Ericsson, GlaxoSmithKline, Proctor & Gamble, Prudential Insurance, British Petroleum and Oracle. Its strategy of leveraging on the regional presence of these companies to expand business has paid off, with MNC revenue rising from 54.1% of total revenue in FY99 to 84.8% in FY01.
Greater China could be new growth kicker. CityAxis ventured into Greater China via a 51:49 joint venture with Interior Services Group (ISG), a renowned occupancy specialist in Europe, in Jun 02. Given ISG's reputation and extensive MNC client base, its participation will raise the profile of the subsidiary and help it clinch deals in Greater China. We are optimistic that CityAxis could transplant its successful business model in Malaysia/Singapore to Greater China, leveraging on the regional presence of MNCs.

The IPO is attractively priced at 9.2x FY01 PE. The average PE for similar companies is 15.8x. We have a target price of 30.5¢, a 30% discount to this given CityAxis' smaller revenue base.

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