Results

• Above Expectation: 9MFY14 profit tripled to RM91m, making up 83% of HLIB and consens us full year estimates, respectively.

Deviations

• Due to better performance from O&G division.

Dividends

• None.

Highlights

YoY, 3QFY14 core earnings improved significantly (+140% yoy) to RM30m mainly due to progress recognition of RM627m contract from StateOil’s Polarled. However, core earnings fell 24% QoQ mainly due to the completion of North Malay Basin contract in 2Q14. We understand that the Polared project was on 70- 72% milestone and ex pects to be completed in May 15.

QoQ, total orderbook fell from RM1.5bn to RM1.4bn (66% from oil and gas division, 21% from renewable energy and 13% from industrial trading & services) after completion of North Malay Basin project. The company is tendering RM5.5 bn worth of job with 65% rel ated to O&G and expects to secure some contract to replenish orderbook for O&G going forward. Most of the current O&G tenders are on track despite recent declining oil price.

The acquisition of 49% equity interest in the JV between Alam and CIMB Private Equity for RM106m was completed in Oct 14 and will starts to contribute in 4Q14.

We expect plantation division to remain in the red in near future. This is due to initial start-up cost. The company plans to plant another 7,500 hectare in 2014-2016.

Risks

• Political risk, Congo Oil Palm Plantation.
• Execution risk.

Forecasts

• FY14 increased by 7% after factored in better performance from O&G division but maintain FY15 earnings.

Rating

HOLD

Positives

• Infrastructure growth related to new fields.
• Strong balance sheet and acquisition record.

Negatives

• Acquisition fuelled growth - volatile in downturns.
• Capex burden developing Congo oil palm.

Valuation

• Maintain HOLD call and TP reduced from RM1.70 to RM1.54 based on lower P/E of 10x (vs. 11x previously) on FY15 EPS of 15.4 sen/share.

Source: Hong Leong Investment Bank Research - 1 Dec 2014