Atlan - Within Estimates

Date: 12/01/2018

Source  :  MAYBANK
Stock  :  ATLAN       Price Target  :  6.00      |      Price Call  :  BUY
        Last Price  :  4.19      |      Upside/Downside  :  +1.81 (43.20%)

Maintain BUY

3QFY2/18 results were in-line but third interim net DPS of 10.0sen (YTD: 21.0sen) was above our estimate. Earnings growth was mainly held up by the duty free and property segments. Our FY18-20 earnings forecasts and MYR6.00 SOP-TP are intact.

Duty free segment largely stable

Excluding one-off items totalling to -MYR6.6m (i.e. forex loss, fair value gains), 3QFY18 core net profit was MYR8.2m (+13% YoY, +5% QoQ), bringing 9MFY18 core net profit to MYR27.4m (-11% YoY) and accounting for 69% of our full-year estimate. Results were within our estimate as we are anticipating seasonally stronger 4QFY18 earnings. YoY, 3QFY18’s core earnings were held up by (i) marginally higher revenue at the duty free segment due to better product and sales mix (i.e. at the airport and bordertown outlets), (ii) sustained profit at the property and hospitality segment. This, however, was partly offset by (iii) slower automotive profits due to higher material costs and maintenance expenses, and (iv) a higher effective tax rate of 32% (excluding one-offs; 3QFY17: 25%).

Earnings estimates unchanged

We maintain our core earnings forecasts. However, we raise our net profit payout forecast to 135% from 100% for FY18 but maintain our conservative FY19-20’s estimates at 100% p.a.. This results in FY18/19/20 net DPS of 21.0sen/16.1sen/16.6sen.

Partnership still positive

DFI’s partnership with Heinemann [via its wholly-owned subsidiary, Heinemann Asia Pacific (HAP)] has remained favourable and resulted in positive, synergistic impact in areas such as (i) transportation costs - down 63% YoY to MYR1.4m for 9MFY18, and (ii) inventory – down 23% YoY to MYR166m (end-3QFY18). We believe there are more operational potentials to be realised from the partnership which could translate into positive earnings impact.

Source: Maybank Research - 12 Jan 2018

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