Investment Highlights

• We maintain our HOLD recommendation on Enra with a lower fair value of RM1.28 (Exhibit 2) from RM1.30 following an earnings revision. We cut our FY20–22F net profit forecasts by 46% 29% and 34% respectively after factoring in lower revenue and margins from its energy services division.

• Enra’s 1QFY20 core net profit of RM0.5mil (-78.6% YoY) came in below our expectation, making up only 15% of our full-year forecast. Revenue fell by 23% YoY due to lower revenue in the energy services division. However, this was partly offset by additional RM19.0mil contribution from the property development division.

• The energy services division posted a lower PBT of RM3.6mil (-56.3% YoY) mainly due to lower revenue in chemical trading business. However, it was partly offset by the additional RM5.7mil revenue from the contract with PC Myanmar (Hong Kong) Limited (PCML) as well as the maiden contributions from ENRA IOL Sdn Bhd and International Chemical Engineering Pty Ltd.

• The property development division recorded a revenue of RM19.0m from the sale of Flat 1 of the Portland Chambers in Central London and sale of a unit in Shamelin Star. The division posted a loss of RM16K due to post-construction expenses in the UK project.

• Meanwhile, management plans to cut its investment holding cost by 15–20% beginning FY20 which will enable it to mitigate the higher finance expenses.

• 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. These will be built 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) and is expected to commence by 3QCY2019 with an estimated development period of 36 months. Revenue and earnings can only be recognised upon completion.

• 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 6 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 - 21 Aug 2019