• We make no changes to our FY18F-FY20F earnings forecasts and maintain our fair value of RM2.45, based on sum-of-parts valuation. Maintain HOLD.

• Enra’s 1QFY18 core net profit of RM1.0mil (-24.3% YoY) made up 7% of our full-year forecast and of consensus. We deem this to be in line with expectations, as we expect stronger quarters ahead with bigger contributions from its property development, and oil & gas businesses. Its revenue dropped 39.6% YoY to RM23.9mil. There was no dividend declared, as expected.

• The drop in Enra’s revenue and earnings was attributed mainly to lower profit from its property development division and higher loss from its investment holding business.

• The property development segment’s pre-tax profit declined 78.8% YoY to RM0.7mil, due to lower sales of inventory units of its Shamelin Star development which was completed in end-FY17.

• Investment holdings segment’s pre-tax loss grew 14.7% YoY to RM2.5mil in 1QFY18, mainly driven by higher staff costs that resulted from higher bonus provision and an increase in the number of staff and directors that is necessary to support the long-term growth of the group.

• On the positive side, its oil & gas division’s pre-tax profit grew 44.3% YoY to RM3.3mil mainly contributed by higher sales in chemical products as more contracts were secured compared to 1QFY17.

• We expect Enra’s performance in the upcoming quarters to be stronger, contributed by its property projects in Shamelin Star and London, and sustained growth at its oil & gas division.

• Moving forward, we expect the property division to remain as the biggest earnings contributor of the group, with its 93 Great Titchfield Street development in London expected to start contributing its earnings in FY18. Over the long run, we expect its Labuan reclamation and development project to become one of the major contributors to the sales and earnings of the group.

• We expect the oil & gas division to sustain its strong growth, underpinned by its existing businesses and new business, namely the single-point mooring contract it recently won in Myanmar, of which the contribution from this contract is expected to commence in FY19.

Source: AmInvest Research - 21 Aug 2017