Investment Highlights

• We upgrade Enra to HOLD from UNDERWEIGHT with a revised fair value of RM1.28 (from RM1.20). Our FV upgrade is to reflect future earnings from the company’s new development in the UK (Exhibit 3). We made no changes to our FY19–21F net profit forecasts.

• Enra is planning to undertake a lifestyle retirement home development in Caldecott Square, Rugby, the UK via a 51% joint venture (JV). The proposed development comprises 71 units of extra care residences incorporating a central facility and 2 visitor suites on 3 pieces of adjoining freehold land measuring 1.8 acres which the JV company acquired for £3.8mil (RM20.4mil) recently. The project has a GDV of £30.1mil (RM161.6mil).

• The residential units will be priced at £385K per unit with a built-up area of 900 sq ft (£428 psf). The centralised facility will provide services such as hotel-style concierge, restaurant, spa pool, fitness and healthcare. The facility will be rented out to an operator for £180K (RM966K) per annum before selling it at a yield of 6.5% at the end of the project.

• The project is expected to commence by 3QCY2019 with an estimated development period of 36 months. Revenue and earnings can only be recognised upon completion while development cost will be capitalised. Nonetheless, the project will have some impact on FY20–FY21 earnings due to project financing cost. Meanwhile, management plans to cut its investment holding cost by 15–20% beginning FY20 which enable it to mitigate the higher finance expenses. Hence, we make no changes to our FY19–FY21 earnings forecasts at this juncture. However, as the project development will increase Enra’s earnings beyond FY21, we revise our FV from RM1.20 to RM1.28 based on SOP valuation (Exhibit 3).

• Enra's forward earnings will be driven largely by: (i) its US$48mil (RM210mil) 4-year contract (beginning April 2018) for the provision of condensate storing and offloading services to the Yetagun offshore gas field, off the coast of Myanmar; (ii) sales from its remaining 8 units in Shamelin Star and its one-off property project in London; and (iii) the retirement home development in Caldecott Square, Rugby, the UK.

Source: AmInvest Research - 8 Apr 2019