25 May 2017, Kajang, Selangor, Malaysia - Construction and JKR largest contractor Protasco Bhd saw the year to year Quarter 1 net profit slump 75.3% from RM13.3mil to RM3.3mil, and cash and cash equivalents at the end of financial year plunge 54.3% from RM69.8mil to RM37.9mil. Despite higher revenue year to year from RM127mil to RM132mil, net profit margin crashed from 12.6% to 3.8%. Total liabilities stood at RM880mil, with bank borrowing of RM549mil. Net asset per share stood at RM0.9329.

Market is concerned with fund managers including Great Eastern Holdings Limited and OCBC rushing for the exit despite management promised better results quarter after quarter, and borrowed money to keep up with dividends. Bursa announced 458,200 shares sold on 23 May 2017 by Great Eastern Life Assurance (Malaysia) Bhd. Protasco share closed at RM0.995 in Bursa Malaysia market closing.

Inferred Price to Earnings ratio (P/E) stood at 127.56 times, which is among the highest in the industry.

Most worrying is the hidden cost & benefit changes year to year, where profit attributable to "Equity holders of the Company" drop from RM13.3mil to RM3.3mil, and "Non-controlling Interests" had ballooned from 16.9% to 34% of total profit, or RM2.7mil to RM1.7mil year to year, which is a significant 100% increase of "money out flows" to parties outside of Protasco.

Property development had seen the largest drop of revenue, from RM10.3mil to negligible RM250,000, a drop of 98%, and further suffered loss of RM960,000.

Analysts which had been following Protasco since year 2015 under Chong Ket Pen stewardship, saw the vanish of cash flows and thinning profit margin across all sectors, including road maintenance, construction and property development. With no sign of better profit margin, the low margin environment is likely to stay, especially with the roll over of low margin projects using new debt to covers old debt, raising red flag among fund managers whether or not to continue betting on the low cash flow businesses. Such environment might affect Protasco future earnings and sustainability, especially vulnerable to material cost and variation risk especially in construction sector.

Despite alarming cash flows, Protasco had declared 3 Sen dividends, or RM12,726,342, or part of the borrowed money to be paid out on 6 July 2017, where 1/4 of that shall goes to single largest shareholder Chong Ket Pen. Such cash out flow is about 33% of cash and cash equivalents on hand as of 31 March 2017 (Q1).

BizT

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5438645

Quarterly rpt on consolidated results for the financial period ended 31 Mar 2017