Results

• Below expectations: Ibraco’s FY17 core PATAMI of RM14m accounted for 89.9% and 88.8% of HLIB and consensus full year forecasts, respectively.

Deviations

• Due to lower-than-expected margin.

Dividends

• None as an interim dividend of 2 sen per share (FY16: 3.5 sen) had been declared on 28th Dec 2017.

Highlights

• QoQ: Revenue grew by 102.6% due to the recognition of new projects in Continew and construction job of Mukah airport. Core profit increased (+39.7%) at a slower pace due to lower margin for construction segment.
• YoY: Revenue improved by 114.0% with improved contributions from new contributing projects such as Continew, SOHO from TT3 and construction work in Mukah airport. Meanwhile, core profit only grew by 37.2% due to lower margin and higher administrative cost.
• FY17: Core net profit declined by 48.1% on the back of 20.3% drop in revenue as key revenue contributing projects were near completion stages while some are at the initial stages of construction. Besides, increase in staff costs, higher depreciation and PPE written off also contributed to the cause.
• In 4Q17, Ibraco achieved new sales of RM22m (FY17: RM301.6m), falling short of FY17 target of RM350m.
• Moving forward, we expect stronger numbers from the progressive recognition of its healthy unbilled sales of RM267m, which represents a healthy cover ratio of 2.4x on top of construction order book of RM302.6m.
• RM325m worth of GDV from its Northbank project is expected to launch in FY18, which includes components like landed properties, apartments, shoplots and townhouses.

Risks

• Delay in planned launches and weaker sales.
• Execution and operational risks.

Forecasts

• We lower our sales and launches assumptions along with lower margin, resulting lower FY18 and FY19 core earnings by 9.5% and 23.7%, respectively.

Rating

BUY ↔ , TP: RM0.93 ↓

• Maintain BUY rating underpinned by an anticipated rebound in earnings underpinned by healthy unbilled sales of 2.4x, supported by above industry average margin and attractive dividend yield exceeding 4%.

Valuation

• Our TP is lowered to RM0.93 (from RM1.00) based on total RNAV of RM1.41 and unchanged 35% discount on RNAV for property segment after factoring lower sales and slower launches.

Source: Hong Leong Investment Bank Research - 01 Mar 2018