Results

• Rohas reported 4QFY17 results with revenue of RM157.7m (+240.7% QoQ) and core PATAMI (ex. forex) of RM12.3m (+72.8% QoQ). The growth in core PATAMI was mainly due to higher revenue driven by contribution from newly acquired HG Power Transmission Sdn Bhd (HGPT).

• FY17 core PATAMI (ex. forex) amounted to RM33.1m (+18.8% YoY), accounted for 113.8% of our full year estimates.

Deviations

• Above expectations mainly due to higher contributions from newly acquired HGPT.

Dividends

• None.

Highlights

• Expected strong boost from high EPCC order book level. Rohas current EPCC orderbook is estimated at RM800m. 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.

• Multiple catalysts for FY18. Multiple catalysts exist for Rohas share price in FY18. Earnings are expected to grow significantly yoy due to contribution from RM300m Laos EPCC project and full year contribution of HGPT. Moreover, Rohas is aiming to double its job replenishment this year to c.RM800m which we deem achievable given strong balance sheet of the company. Besides, we opine that expectation of admission into the Shariah list this year further increase buying interest of the stock.

Risks

• Failure to clinch future EPCC projects.

Forecasts

• As YTD job wins of c.RM250m has already made up c.80% of our full year orderbook replenishment assumption for HGPT, we raise the assumption to RM400m (from RM300m). As a result, FY18-19 earnings forecast are raised by 4.8% and 7.1% respectively.

Rating

• Maintain BUY, TP :RM1.74

• 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.

Valuation

• Maintain BUY recommendation with higher TP of RM1.74 orderbook replenishment assumption adjustment. TP is based on unchanged 16x P/E multiple pegged to FY18 earnings.

Source: Hong Leong Investment Bank Research - 26 Feb 2018