Highlights

Intelligent Research report

Author: intelligenttrade   |   Latest post: Mon, 18 Mar 2019, 10:08 AM

 

George Kent (Malaysia) - 3Q19 Results Below

Author:   |    Publish date:


GKent’s 9MFY19 earnings of RM62m (-19% YoY) were below both HLIB and consensus expectations. YTD core PATAMI decreased due to lower contribution from both metering segment and LRT3 PDP JV. The lower contribution from LRT3 PDP JV was due to scaling down and extension of construction timeline for LRT3. LRT3 has been restructured to a fixed price contract with contract sum of RM11.9bn. Construction is anticipated to resume in 2H19. Cut FY19-21 earnings by 7.6%, 13.0% and 6.2% respectively after imputing higher operating expenses. Maintain HOLD rating with lower TP of RM0.97 (from RM1.27) following earnings cut, balance sheet update and adjustment of PE multiple ascribed to metering segment to 8x (from 10x).

Below expectations. GKent reported 3QFY19 results with revenue of RM103.6m (- 8.3% QoQ, -18.5% YoY) and core earnings of RM18.1m (-23.0% QoQ, -42.1% YoY). This brings 9MFY19 core earnings to RM62.0m, decreasing by 18.6% YoY. The core earnings accounted for 68% of our full year forecast (consensus: 70%), which is below expectations. The results shortfall was mainly due to higher than expected operating expenses and tax rates (effective tax rate of 51% in 3Q). 1.5 sen 2nd interim dividend was declared.

QoQ. Core PATAMI decreased by 23% due to lower contribution from engineering segment and LRT3 PDP JV, partially offset by higher contribution from metering segment.

YoY. Core PATAMI decreased by 42% due to lower contribution from both engineering (inclusive of LRT3 PDP JV) and metering segment.

YTD. Core PATAMI decreased by 19% due to lower contribution from both metering segment and LRT3 PDP JV. The lower contribution from LRT3 PDP JV was due to scaling down of work scope and extension of construction timeline for LRT3.

LRT3. LRT3 has been restructured to a fixed price contract with contract sum of RM11.9bn. Negotiations are ongoing to finalise the terms of the new contract, while the project is being redesigned based on the revised specifications. Construction is anticipated to resume in the second half of 2019.

Forecast. Cut FY19-21 earnings by 7.6%, 13.0% and 6.2% respectively after imputing higher cost structure.

Maintain HOLD, TP: RM0.97. Maintain HOLD rating with lower TP of RM0.97 (from RM1.27) following the earnings cut, balance sheet update and adjustment of PE multiple ascribed to metering segment to 8x (from 10x). Our SOP valuation for GKent is based on (i) NPV (WACC: 12%) for its engineering division with nil orderbook replenishment, (ii) 8x P/E for metering assuming no YoY growth and (iii) 20% discount to its net cash per share. Our valuation is based on bear case scenario for the company to reflect slowing mega rail job flows and earnings sustainability issue post completion of LRT3 which is expected in FY24.

 

Source: Hong Leong Investment Bank Research - 20 Dec 2018

Share this
Labels: GKENT

Related Stocks

Chart Stock Name Last Change Volume 
GKENT 1.14 +0.05 (4.59%) 11,059,800 

  Be the first to like this.
 


 

327  306  557  720 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 ARMADA 0.185-0.01 
 SAPNRG 0.335-0.01 
 MYEG 1.40+0.07 
 MTRONIC-OR 0.0050.00 
 SAPNRG-WA 0.13-0.015 
 HSI-C5A 0.27-0.01 
 NAIM 1.17+0.14 
 SEACERA 0.340.00 
 IRIS 0.15+0.005 
 PERDANA 0.405-0.005 
Partners & Brokers