JAKS Resources’ (JAKS) 4QFY19 net profit, as expected, slowed down to RM17.8m (NM YoY, -28.7% QoQ) which was within our expectation but below consensus. In FY19, Group net profit came in at RM108.6m (>100% YoY) which constituted 96% and 90% of our and consensus full year estimates. The overall completion for its power plant in Vietnam is said to be at 93%, from 82% a quarter ago. We understand that the completion of its first unit which was initially thought to be by end-2019 is now postponed due to Covid-19. The commercial operation date (COD) is now targeted for 3QFY20, from 1HFY20 earlier. As such, we revise our FY20/FY21earnings downwards by -41%/-29%. We also change our valuation method from SOTP to RNAV as JAKS’ value is now mainly driven by its power plant, versus various business units previously. Maintain Neutral, with TP increased to RM1.13, from RM1.00 previously (pegged at 35% discount to RNAV) on lower completion risks of its power plant. All told, we are still wary over the various dilutive equity fund raisings done so far to meet its liquidity demands and the poor execution especially on its property business.

• Power plant at 93% completion. EPC contract revenue and net profit, as expected, continued to slow down with the Group recognizing RM166.9m revenue and RM32.9m net profit in Q4FY19. For FY19. The Group recognized RM1.1bn (+62.3% YoY) and RM108.6m (+607.6% YoY) from the EPC contract. It still has RM338m remaining to be billed with the power plant expected to be completed by 2020.

• Outstanding orderbook at RM618.6m. In the absence of new jobs, the Group’s outstanding orderbook dropped from RM847m to RM618.6m in 4QFY19. This is in line with the Group’s strategy to re-focus its resources on the Vietnam power plant project.

• Property LAD to end in FY20. Property losses could drag longer but we understand that Management is still working to complete the Star Tower and the remaining 3 blocks by 1H2020. Unbilled sales as at 4QFY19 stood at RM130m. Occupancy at the Evolve Concept Mall dropped to 72% from 85% with committed tenants at 86%.

Source: PublicInvest Research - 28 Feb 2020