• 4Q18 results were affected by impairments made to receivables. This resulted in 2018 core losses of RM8.1m, which disappointed our estimates.
• Despite outstanding orderbook of RM766.7m providing visibility of up to 2 years, we remain negative on its outlook due to margin compression and tight cash flow.
• Maintain SELL with TP of RM0.095 as we expect the business would continue to face challenges amidst the poor sector outlook and its poor receivables putting pressure on working capital.

Slipped into negative territory

4Q18 posted a core net loss of RM20.5m as compared to net profit of RM2.1m and RM5.9m for 4Q17 and 3Q18. This has led its FY18 core earnings into a net loss of RM8.1m. The losses ae mainly on recognition of receivables impairment of RM34m at cost of sales level.

Remain negative on its outlook

We remain negative on its outlook despite a healthy orderbook of RM766.7m that provides earnings visibility of up to 2 years. Management also cited the challenging business environment and would be embarking on a cost rationalisation exercise to sustain operations.

Maintain SELL and TP RM0.095

Maintain SELL with a TP RM0.095 as we believe its business prospects remain challenging coupled with poor receivables pressuring working capital needs. Nevertheless, we maintain our 2019F and 2020F to be remain in profit with minimal margin as we believe the receivables impairment will be normalise from this year onwards.

Source: BIMB Securities Research - 1 Mar 2019