SHL Consolidated Bhd - 2Q FY 2019 Results Report (BUY)

Date: 28/11/2018

Source  :  WILSON & YORK
Stock  :  SHL       Price Target  :  2.62      |      Price Call  :  BUY
        Last Price  :  1.98      |      Upside/Downside  :  +0.64 (32.32%)


YTD 2Q FY19 revenue decreased 4.5% vs YTD 2Q FY18, whilst profits before tax increased 16.6% over the same period. The increase in PBT is mainly due to higher profit margins, flowing from a 29% reduction in operating costs over the same period as above. The property industry is expected to remain sluggish due to tighter lending policies put in place by Bank Negara and a broadly weaker economic environment. SHL Consolidated Bhd (“SHL”) is a well run company with a good land bank that has years to run. The company’s emphasis on good value has helped it maintain steady earnings despite very challenging conditions.


Risks to our recommendation and target price include: i) softness in property prices, ii) an increase in the general level of interest rates, and iii) an increase in the cost of building materials.


We upgrade our HOLD recommendation on SHL to BUY whilst decreasing our fair value estimate to MYR 2.62. The stock price has come down to attractive levels following our HOLD call last quarter. SHL has a very solid balance sheet and should be able to maintain prospective dividend yields above 6% over FY 2019-2020. Our BUY recommendation is also premised on SHL’s excellent landbank and management. SHL recently formed a JV with Japan’s Marubeni Corp to construct a condominium project with an estimated GDV of RM327 mn at Bandar Sungai Long, Selangor in which SHL holds a 67% stake. The project sits on a 9.56 acre land consisting of 568 condominium units and is expected to take off soon with an expected completion date in March 2020.


SHL Consolidated Bhd is an investment holding company and it provides strategic, financial and corporate planning services. SHL Consolidated Bhd. and its subsidiaries are an integrated commercial and residential property development group, which are also involved in granite quarrying and manufacturing of aggregates, general building construction, earthworks, infrastructure works, the ownership and operation of a golf resort, the manufacture of clay bricks, supply of finished brickworks of wall and other brick structures, the manufacture of aluminum framed doors and windows, the provision of soil and concrete laboratory testing services, the provision of professional construction management and geo-technical services, the marketing and distribution of building materials, rental of properties and money lending business. Its subsidiaries include SHL Corporate Services Sdn. Bhd., Goodstock (Tawau) Sdn. Bhd. and Wilayah Builders Sdn. Bhd.

Source: Wilson & York Securities Research - 28 Nov 2018

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