Taiwan's columbaria products and funeral services provider Lung Yen Life Service, which recently invested $40 million to set up a subsidiary in China, has an analyst bullish on its future earnings prospects.
Daiwa Capital Markets has a 'buy' call on the Taiwan-listed company as it believes it is well positioned to get a huge slice of the estimated NT$60 billion a year ($2.1 billion) funeral services industry.
Albert Hsu, a conglomerates analyst at the investment bank, said in a report, "We like Lung Yen for several reasons. First, there is always demand for the company's services. Second, it has upgraded its columbaria products and funeral services, in part to enhance its reputation."
Lung Yen's has hired top-rated architects like Japan's Tadao Ando, who designed its columbarium complex at its cemetery in Taipei, drawing interest from wealthy Taiwanese.
Hsu also noted that the company's pre-sale model and available land space provided long-term visibility on earnings. Lung Yen purchased two floors of commercial property in Taipei for $39.8 million in April, as well as a near 50 percent stake in the Taipei Financial Center building for $56.9 million last August.
Daiwa also said in its report that if the company could duplicate its business model in China, it could tap into a population that is 60 times bigger than that of Taiwan. Lung Yen, which sells its products through a network of salespeople, had record earnings of $30.3 million dollars in 2010.
Hsu's six-month price target for the company is NT$160, a more than 20 percent premium to its Wednesday's close of NT$131.50.