Highlights

JF Apex Research Highlights

Author: kltrader   |   Latest post: Wed, 1 Sep 2021, 4:22 PM

 

LBS Bina Group Berhad - on Track to Meet Sales and Earnings Targets

Author: kltrader   |  Publish date: Wed, 1 Sep 2021, 4:22 PM


Result

Meeting our estimate but above consensus. LBS Bina Group (LBS) achieved 2Q21 net profit of RM16.3m, more than doubled yoy but declined 35.3% qoq. Overall, 1H21 net profit of RM41.5m, surging 10 times yoy, which accounts for 55%/61% of our/market full year earnings estimates.

Comment

Better yoy but lower qoq. On yoy basis, the stronger quarterly results were mainly due to low base effect with longer non-operational periods under movement restriction control during 2Q20 as compared to this quarter of the year in which Full Movement Control Order (FMCO) only started in early June. Hence, we witness the higher contributions for both of its Property Development and Construction divisions. The same applies for its better 1H21 performance as construction activities were allowed to operate at full capacity during most of the time in 1H. Also, this was largely attributable to the good take up rates and steady construction progress from its on-going development projects at KITA@Cybersouth, Alam Awana, Skylake Residence, Residensi Bintang Bukit Jalil and Bandar Putera Indah. Development projects within the Klang Valley remained as the largest revenue contributor, accounting for more than 77% of the Group’s revenue for this period. On qoq basis, the weaker net earnings were due to the construction activities of all development projects were put on a halt for the full month of June 21 as a result of FMCO lockdown.

Steady sales amid current headwinds. Under prevailing difficult operating atmosphere, LBS still chalked up RM728m new sales and bookings of RM600m as of end August 21. The new sales account for 61% of its 2021 sales target of RM1.2b. Majority of sales were contributed by Klang Valley projects (88%), mainly from Kita@CyberSouth, Mercu Jalil and LBS Alam Perdana. The Group plans for a total GDV of RM1.2b project launches for 2H21 mainly in the Klang Valley. Going forward, the Group will extend its leverage on technology for its marketing efforts as well as increase efforts in digitisation to streamline and enhance efficiency within its business operations.

On-going and future projects to drive mid-to-long term growth. We are optimistic on LBS’ medium to long term growth as it is boasts sizeable landbank across various states which enables the Group for immediate launches and caters different market segments. Currently, LBS registered RM2.3b unbilled sales, which provides the Group’s earnings visibility for the next 2-3 years. The Group has 19 on-going projects with a total GDV of RM5.7b, land bank for future development of 3,343 acres with an estimated GDV of RM27.2 billion.

Earnings Outlook/Revision

No change to our net earnings estimates of RM74.8m (75.5% yoy growth) for 2021 and RM82.6m (10.5% yoy growth) for 2022.

Valuation & Recommendation

Maintain BUY on LBS with an unchanged target price of RM0.62. Our target price is pegged at PE multiple of 12x 2022F EPS. This is in line with its +1SD of 5-yr mean PE and current valuations of large-cap property counters which are trading at 12-15x forward PE.

We favour the stock for its: a) Commendable sales amid prevailing soft property market, b) Sound business strategy of concentrating in selling affordable landed housing especially in Klang Valley; c) Strong earnings visibility underpinned by its healthy unbilled sales, on-going and future project developments; and d) Unlocking potential landbank values in Zhuhai International Circuit (ZIC), China in the medium-to-long term.

 

Source: JF Apex Securities Research - 1 Sept 2021

Labels: LBS
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Padini Holdings Berhad - Light at the End of the Tunnel

Author: kltrader   |  Publish date: Mon, 30 Aug 2021, 8:51 AM


Result

  • Padini Holdings Berhad (Padini) registered a core net profit of RM10.5m during 4QFY21 which depleted 6.7% qoq but rebounded from core net loss of RM17.6m a year ago. Meanwhile, revenue slid 20.2% qoq but jumped 20.4% yoy.
  • As for full year FY21, the Group’s core net profit of RM56.1m declined 23.3% yoy amid disappointing revenue, -24% yoy. The discouraging results were resulted from re-implementation of lockdown pursuant to rising Covid-19 cases which led to closing of more stores.
  • Below our expectations but within market estimate. Padini’s 12MFY21 core net profit of RM56.1m is substantially below our in-house estimate which only accounts for 88.5% full year core net profit forecast but within market expectation (92.1%).

Comment

  • Full closure of all retail outlets weighed on QoQ results. Padini’s revenue and PBT slid 20.2% qoq and 21.4% qoq respectively given implementation of lockdown which led to closure of all of its store operations. During 3QFY21, all of its stores were closed since 1st June due to Full Movement Control Order (FMCO), the Group only opened its Sarawak stores on 14th July (as Sarawak had moved to Phase 3 states on 1st July under National Recovery Plan (NRP)). After that, all of the stores were allowed to open starting 18th August after relaxation of economic activities with stores to be reopened in states but subject to strict standard operating procedure (SOP). Businesses are now allowed to resume operations with limited workforce and only to serve fully vaccinated customers.
  • Rebound in YoY performance amid low base effect. On yoy basis, revenue up 20.4% yoy whilst profit returned to the black with PBT of RM13.2m (vs LBT of RM18.8m a year ago). This was driven by low base as longer lockdown during first Movement Control Order (MCO 1.0) as all of its outlets were closed in full capacity for longer period. However, gain was partly offset by higher effective tax rate of 20.8% as compared to 10.6% during 4QFY20.
  • Dismal FY21 due to unprecedented spike in Covid-19 cases. 12MFY21’s PBT margin was down 0.7ppts yoy on the back of unexciting revenue which eased 24% yoy, bogged down by Covid-19 pandemic. Retail outlets were closed for operations for months and affected the Group’s topline and bottomline for the whole year. On top of that, sales plummeted as the Group had to close 6 brands outlet stores, 2 Padini concept stores and 3 free standing stores in order to adjust their cost structure.
  • Back to business envisaged for FY22F. We deem the Group to resume their business in FY22 as stores are now allowed to re-open since mid-Aug’21. Given faster vaccination rate in our nation (61.9% of population fully vaccinated; 82.2% of population with at least one dose as at 28 th Aug) at this juncture, we expect our nation to reach herd immunity latest by 1HCY22 given rapid vaccination roll-out. We also believe their brick-and mortar sales return back to normal in the near term underpinned by consumer confidence in visiting the stores with more people being vaccinated. The Group will continue to emphasize on cost optimization strategy such as better control costs, optimizing working capital, preserving cash and streamlining operations to minimize the impact.
  • Downside risks include: (a) Stiff retail competition especially in apparel and footwear industry, (b) Strengthening of Chinese Renminbi against Ringgit Malaysia, (c) Higher operation costs, and (d) Prolonged Covid-19 outbreaks.

Earnings Outlook/Revision

  • No changes to our FY22F core earnings forecast of RM78.9m (+45.8% yoy growth). We would also like to introduce our FY23F core earnings forecast of RM91.7m (+16.3% yoy growth).

Valuation & Recommendation

  • Upgrade to HOLD from SELL with a higher target price of RM2.90 (RM2.40 previously) after we assign higher PE to reflect better business prospects in the near terms. Our valuation is now pegged at 24.2x FY22F PE (20x previously) with an EPS of 12sen, slightly higher than its 5-year average mean PE of 22.4x.

 

Source: JF Apex Securities Research - 30 Aug 2021

Labels: PADINI
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MGB Berhad - Expecting Stronger 2H21

Author: kltrader   |  Publish date: Mon, 30 Aug 2021, 8:48 AM


Results

  • Result below expectation. MGB Berhad (MGB) posted 2Q21 net profit of RM4.3m, which soared 975.0% yoy but tumbled 57.4% qoq. For 1H21, the Group achieved RM14.4m net profit, +396.6% yoy, which accounts for 41% of our full year net earnings estimate. The weaker-than-expected result is mainly due to lackluster showing of this quarter as impacted by Full Movement Control Order (FMCO) in June this year as construction progress and business activities were halted.

Comment

  • Stronger yoy performance due to low base effect underpinned by Construction segment. MGB registered better yoy result mainly driven by its strong showing of Construction segment as segmental revenue soared 130.4% yoy while segmental bottom line returned to PBT of RM7.2m from a loss before tax of RM1.3m. The improvement of result was due to the relaxation of movement restrictions in 2021 whereas Movement Control Order (MCO) 1.0 implemented from 18 March 2020 to 9 June 2020 had completely halted the operation of the Group for approximately 1.5 months in 2Q20. On the other hand, we witness the sluggish performance posted by its Property Development during this quarter with its segmental revenue and PBT slid -80.0% yoy and -94.4% yoy respectively, were mainly attributable to timing difference of project recognition. The delivery of vacant possession of Zenopy Residences in Dec 20 and Laman Bayu Phase 1 in Mar 21. Similarly, the longer working periods that allowed to operate under movement restriction control during 1H21 as compared to 1H20 coupled with reversal of over-accrued project costs and recognition of savings arising from costs sharing with subcontractors also yielded better yoy result.
  • FMCO weighed on qoq result. Lower qoq performance of the Group was mainly attributable to weaker contributions from its Construction (top line: -20.1% qoq, bottom line: -44.6% qoq) and Property Development (top line: -82.5% qoq, bottom line: -92.9% qoq). As mentioned earlier, the implementation of FMCO in June 21 adversely affected the Group’s construction progress and business amid fixed operating costs incurred.
  • Anticipating better 2H. With the relaxation of movement restriction, we envisage MGB to deliver stronger 2H driven by higher working progress for its Construction segment as well as its Property Development - handover of the vacant possession of Laman Bayu Phase 2 at Bandar Putera Indah in 3Q. Furthermore, new launch of Laman Bayu Phase 3 (118 units of affordable landed residences in Batu Pahat, Johor with a total GDV of RM45m) is expected to further boost 2H earnings. We understand that the response for the Phase 3 was overwhelming with 60 units being booked out of 62 units that opened for registration thus far.
  • Healthy outstanding orderbook and unbilled sales. As of end-July 21, MGB boasts RM1.9b of outstanding construction orderbook and property unbilled sales of RM20.8m which will underpin its earnings visibility for the next 2-3 years. Meanwhile, the Group’s current tender book is c.RM1b, mainly stemming from government projects (infrastructure works and government buildings).
  • Launch of Rumah Selangorku Idaman (RSI) projects by end of this year. Amid current economic uncertainty, the Group will focus on its core objective in constructing and developing affordable housings in Klang Valley. We understand that MGB targets to launch all of its 6 RSI projects which are strategically located in Klang Valley by end of this year with soft launch is tentatively scheduled in Sept. Meanwhile, the Group has completed its factory upgrade for Industrialised Building Sistem (IBS) precast plants in Alam Perdana and Nilai. After all, MGB has a capacity to produce up to 6,000 units of affordable housings per year. This enables the Group to enjoy cost advantage in constructing RSI projects.

Earnings Outlook/Revision

  • No change to our net earnings forecasts of RM34.7m for 2021 and RM66.2m for 2022 as we opine that the Group would catch up on construction progress in 2H.

Valuation & Recommendation

  • Maintain BUY with an unchanged target price of RM1.15. Our target price is derived by ascribing a 10x PER to the Group’s 2022F diluted EPS (after conversion of 90m ICPS). This is in line with other mid and small-cap construction and property companies which are currently trading at 7-10x forward PE.
  • We favour the stock for: 1) Benefiting from the affordable residential market segment which is relatively unfazed by the prevailing supply-demand imbalance; 2) Serving a niche market with high entry barrier as the Group commands cost advantage in constructing affordable housings, mainly leveraging on its expertise and scale in IBS; 3) Sizeable construction outstanding order book of RM1.9b as well as a whopping RM1.1b RSI worth of property launches targeted in 2H21 onwards; 4) Earnings are back to growth trajectory as the Group is expected to attain 2021F and 2022F bottom line growths of 147.6% and 90.9% yoy on the back of its top line growths of 44.6% and 53.0% yoy respectively; and 5) Backed by an established major shareholder, LBS Bina Group Berhad with expected continuous orderbook replenishment as well as chances of tapping into LBS’ strength and resources.

 

 

Source: JF Apex Securities Research - 30 Aug 2021

Labels: MGB
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Bumi Armada Bhd - Strong Sales Recorded

Author: kltrader   |  Publish date: Mon, 30 Aug 2021, 8:45 AM


Results

  • Higher earnings - Bumi Armada reported 2Q21 PATAMI of RM139.9m, rising 17% YoY, thanks to lower finance costs, higher other operating income, higher contribution from JVs and tax reversal. Excluding an impairment of RM104m on 8 offshore support vessels and RM12m gain from sale of two vessels, 2Q21 normalised PATAMI doubled YoY to RM243.6m.
  • Steady revenue – 2Q21 revenue increased 1% YoY to RM615.6m due to higher contribution from Floating Production & Operation (FPO) (+2% YoY to RM533.1m) despite shutdowns of Armada Kraken and Armada Sterling 3. This cushioned the decline in Offshore Marine Services (OMS) (-4% YoY to RM82.5m) due to higher utilisation rate of 70% vs 44% in 2Q20.
  • Better QoQ on normalised profit – Compared to the previous quarter, 2Q21 reported net profit dropped 14% QoQ due to the RM103m impairment. Excluding the impairments, normalised PATAMI grew 50% QoQ. Quarterly revenue increased 9% QoQ as FPO revenue rose 8% QoQ while OMS revenue increased 22% QoQ.
  • Lower orderbook – Orderbook was lower at RM14.9b (FPO: RM14.5bn, OMS: RM0.4bn) vs RM15.8b in 1Q21 due to dwindling OMS orderbook as the group plans to exit the OMS segment. The FPSO’s orderbook could sustain the group’s revenue for the next few years.

Earnings Outlook/Revision

  • Above expectation – 1H21 normalised net profit of RM406.4m achieves 84% of our full year forecast of RM484.7m while six-month revenue is within expectation after accounting for 45% of our FY21 forecast.
  • Forecasts lifted – We are raising our EPS forecasts for FY21 and FY22 by 47% and 29% respectively to account for the higher other operating income, higher contribution from JVs and lower expected tax rate while revenue estimates are maintained.
  • Lower debt – Total debt was reduced to RM9.35b from RM9.71b in 1Q21 after the company repaid borrowings of RM398.3m in 2Q21. Trade receivables increased 30% to RM622m mainly due to delayed collection from a client but management noted that payment has been received in July 2021.
  • Monetising assets - The management intends to exit the OSV business by year-end and has 14 vessels remaining for sale.

Valuation & Recommendation

  • Upgrade to BUY from HOLD with a higher target price of RM0.55 (previously RM0.42) based on +1.5 std dev on its 3-year average P/B and FY22F BVPS.

 

Source: JF Apex Securities Research - 30 Aug 2021

Labels: ARMADA
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Axiata Group Bhd - Firing on All Cylinders

Author: kltrader   |  Publish date: Mon, 30 Aug 2021, 8:43 AM


  • Strong profit – Axiata’s 2Q21 reported PATAMI more than tripled YoY to RM278m due to strong performance in all operating companies (OpCos). Similarly, underlying PATAMI (excluding forex impact) rose more than six folds YoY to RM302m mainly due to lower losses from digital services and higher EBITDA contribution from OpCos.
  • Higher revenue - Quarterly revenue grew 10% YoY to RM6.39b due to higher contribution from all OpCos.
  • Better QoQ – 2Q21 underlying PATAMI increased 38% QoQ due to lower accelerated depreciation and higher EBITDA by all OpCos except Ncell. Quarterly revenue rose 5.4% QoQ due to higher contribution from all OpCos.
  • Improved OpCos - All OpCos’ revenue have recovered to prelockdown levels except Ncell, which was impacted by restricted movement, network coverage disadvantage and spectrum constraint.
  • Resilient tower business – edotco’s 2Q21 PATAMI declined 18.5% QoQ to RM74m on the back of a 1.5% QoQ revenue growth to RM480m driven by Malaysia and Bangladesh markets. Management noted that the tower business has experienced limited impact from the Myanmar coup so far.
  • Narrowed losses from digital services – ADS’ 2Q21 revenue more than doubled QoQ to RM284m thanks to digital advertising while net loss grew 30% QoQ to RM38m. For 1H21, net loss declined 65% YoY to RM67m from RM191m in 1H20 following narrowed losses at its digital financial services.
  • Strong margins – Axiata maintained its EBITDA margin of 44% thanks to operating cost savings of RM225m in 1H21.
  • Steady gearing – Net debt/EBITDA was flat at 1.85x while cash reserves increased to RM7b in 2Q21 from RM6.6b in 1Q21. Adjusted Operating free cash flow improved to RM786m from RM710m in the previous quarter.

Earnings Outlook/Revision

  • Earnings met expectation – 1H21 revenue and normalized PATAMI achieved 52% and 58% of our full year forecasts respectively.
  • Forecast maintained – As such, we are keeping our FY21 EPS forecast.
  • Management guidance - The management maintained its guidance of a low single digit % growths for both revenue and EBITDA in 2021 as well as capex of RM6.5b.
  • Merger update – The management updated that they have submitted the relevant documents for the Celcom-Digi merger and is now pending approval by the authorities.

Valuation & Recommendation

  • Maintain BUY with an unchanged target price of RM4.53 based on Sum-Of-Parts (SOP). We expect earnings growth to sustain given the resilient demand for data and improved profitability from digital services.
  • Risks include: Covid-19 situation worsens, regulatory development and 5G rollout in Malaysia and slower than expected recovery in Ncell.

 

Source: JF Apex Securities Research - 30 Aug 2021

Labels: AXIATA
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Telekom Malaysia Bhd - 2Q Earnings Bogged Down by Higher Opex

Author: kltrader   |  Publish date: Mon, 30 Aug 2021, 8:40 AM


Results

  • Declined earnings – TM’s 2Q21 reported net profit dropped 21% YoY to RM218.5m while normalized PATAMI declined 4.7% YoY to RM255m due to higher other opex by RM108m which included provisions under the group’s manpower optimisation initiatives.
  • Steady revenue – 2Q21 revenue rose 6.6% YoY to RM2.76b due to YoY growth in all business segments: Voice (+2.1% to RM584m), Data (+6.1% to RM747m), Internet (+7.9% to RM994m and Others (+10.6% to RM437m).
  • Lower QoQ earnings – TM’s normalised PATAMI of RM255m dropped 23% QoQ amid lower revenue (-1.7% QoQ to RM2.76b) as total costs increased 7.8% QoQ. Revenue from Data (-6.6% QoQ) and Others (-9% QoQ) declined while Internet (+2.1% QoQ) and Voice (+5% QoQ) posted growth.
  • Subscriber growth momentum – Total broadband subscribers increased 12% YoY and 5% QoQ to 2.56m as UniFi subscribers grew 38% YoY and 10% QoQ to 2.14m to cushion the decline in Streamyx subs which decreased 39% YoY and 15% QoQ to 0.42m.
  • Lower ARPUs – TM’s Average Revenue Per User (ARPU) for Streamyx broadband was stable QoQ at RM91 while ARPU for UniFi declined to RM141 vs RM144 in 1Q21.
  • Steady gearing – Net debt/EBITDA was flat at 1.44x (from 1.42x in 1Q21) while cash reserves was stable at RM1.82b vs RM1.84b in 1Q21.

Earnings Outlook/Revision

  • Within expectation – 1H21 normalized PATAMI achieved 52% of our full year estimate six months’ revenue accounted for 51% of our FY21 forecast.
  • Estimates maintained – We are keeping our forecasts for FY21 as we view the provision for manpower optimisation as one-off. Earnings momentum will be sustained by strong demand for fixed broadband and ongoing cost optimisation.
  • Key beneficiary – We are positive on the stock as TM is a key beneficiary of JENDELA plan given its infrastructure of fibre network and submarine cables as well demand for data centres and 5G rollout.

Valuation & Recommendation

  • Maintain BUY with an unchanged target price of RM6.64. The fair value is based on DCF with assumption of 1.5% terminal growth and 9% discount rate.
  • Dividend – TM has announced an interim dividend of 7 sen and we expect full year dividend to be 15 sen or 2.5% yield.

 

Source: JF Apex Securities Research - 30 Aug 2021

Labels: TM
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