Results 

1HFY14 core earnings (adjusted for RM6.9m forex loss and RM2.0m disposal loss) dipped by 5% to RM83.3m (7.64 sen/share), making up 47% our estimates but missing streets’ forecasts by making up 43% of full year earnings.

Deviations

Largely in line.

Dividends

Net dividend of 1.25 sen/share declared and distribution of 1 treasury share for every 100 shares held (equivalent to 2.3 sen/share based on current share price). Ex-date on 11 Sep- 14 and payment date on 10 Oct-14.

Highlights

1HFY14 results… 1HFY14 revenue fell by 11% to RM868.7m, mainly due to decline in construction and property development activities. Hence, overall core earnings fell by 5% to RM83.3m.

2Q results… Performance continued to be weak with 2Q revenue declining by 17% YoY (-14% QoQ) to RM401.5m due to weak contribution from the construction and property development divisions. Quarterly core earnings fell by 19% YoY (QoQ: -21%) to RM37m.

Risks

• Execution risk;
•  Regulatory and political risk (both domestic and overseas);
• Rising raw material prices;
• Unexpected downturn in the construction and property sector; and
• Failure in securing new sizable construction contracts.

Forecasts

Under review, subject to revision post analyst briefing.

Rating

HOLD 

2Q results continued to be subpar and we remain lukewarm on its near term outlook given: (1) Major contract wins have been elusive; (2) RM1.2bn property sales target may be too bullish given the slowdown in property sector, particularly in Johor; and (3) Potential start-up losses fromGateway@KLIA2. All in, we are maintaining our HOLD call on the company due to the lack of upside catalyst(s).

Valuation

TP maintained at RM2.26 based on unchanged 14x average FY14-15 earnings. Subject to revision post analyst briefing

Source:Hong Leong Investment Bank Research - 22 Aug 2014