Results

• Rohas reported 3QFY17 results with revenue of RM46.3m (-13.6% QoQ) and core PATAMI (ex. forex) of RM7.1m (+27.5% QoQ). The growth in core PATAMI was mainly due to lower cost of sales (-21.5% QoQ) and lower admin expenses (-25.0% QoQ)

• 9MFY17 core PATAMI (ex. forex) amounted to RM17.5m, accounted for 60.1% of our full year estimates.

Deviations

• Deemed inline as we expect stronger 4Q mainly due to contributions from Laos EPCC contract and newly acquired HG Power Transmission Sdn Bhd (HGPT).

Dividends

• Declared interim dividend of 1 sen.

Highlights

• Contribution from HGPT and Laos EPCC project to start in 4Q. Acquisition of HGPT was completed back in mid October and we expect Rohas book in 1-2 months of HGPT earnings in 4Q results. Besides, the RM300m Laos EPCC project to supply and construct transmission lines, substations and distribution lines will start to contribute from 4Q onwards.

• Strong boost from high EPCC order book level. Rohas current EPCC orderbook is estimated at RM650m. This is expected to provide a strong boost to Rohas’ earnings growth going forward as the current contribution from EPCC division is minimal. Besides, the company is targeting to double its job replenishment next year to c.RM800m which we opined is mainly due to more tower fabrication jobs from East Malaysia and more water related EPCC projects.

Risks

• Failure to clinch future EPCC projects.

Forecasts

• Maintained.

Rating

Maintain BUY, TP :RM1.69 ↔

• We like Rohas for its exposure to ASEAN which is one of the fastest growing economic regions in the world. Infrastructure investment needs are expected to be robust in the foreseeable future and this will generate steady demand for the products of the company. Moreover, the acquisition of HGPT is expected to open up more EPCC contract opportunities for Rohas in new markets.

Valuation

• Maintain BUY recommendation with unchanged TP of RM1.69 based on unchanged 16x P/E multiple pegged to FY18 earnings.

Source: Hong Leong Investment Bank Research - 22 Nov 2017