Results

• Within expectation but below consensus– 2QFY17 core net profit came in at RM13.1m, bringing 1H17 core net profit to RM26.5m, accounting for 48% and 35% of HLIB and consensus forecast.

Deviations

• None.

Dividend

• None.

Highlights

• YoY: Core net profit surged 76.4% to RM13.1m in 2Q17 mainly due to (i) stronger revenue from its property division on the back of contribution from major project (Pinetree Marine Resort Project), and (ii) lower finance cost. This is being partially offset by weaker YoY logistics top line due to early ending of Raya festive season.
• QoQ: 2Q17 core net profit declined slightly by 2.9% driven by weaker QoQ performance of logistics business division on seasonally slower sales post festive season coupled with seasonally lower margin. This is being offset partially by stronger QoQ property division earnings due to higher billings from its major property project.
• YTD: 1H17 core net profit came in at RM26.5m, 26.3% higher YoY underpinned by (i) stronger logistics margins due to possibly better cost management and (ii) stronger property topline growth driven predominantly by Pinetree Marine Resorts project progress billing.
• Comment: Logistics and warehousing division will continue to anchor the group’s growth in the coming years with e-commerce and resilient increase in B2B trade volume expected.
• Meanwhile, property development segment is expected to account for smaller portion of the group’s total revenue post completion of Pinetree project next year.

Risks

• Contract cancellation from major customers;
• Surge in fuel prices;
• Decline in domestic trade volume

Forecasts

• Maintain forecast and assumptions.

Rating

BUY ↔

• Tiong Nam is poised to benefit from the resilient increase in e-commerce and B2B trade. We believe that company’s plan to unlock value of its warehousing assets through REIT-listing remains intact.

Valuation

• Maintain BUY with SoP-driven TP maintained at RM2.07 (+29% upside).

Source: Hong Leong Investment Bank Research - 29 Nov 2016