Rohas’s 1QFY18 core PATAMI of RM7.8m was in line with HLIB estimates. Core PATAMI increased by 60.6% mainly due to increase in deliveries of telecommunication towers and higher EPCC works done in Bangladesh and Malaysia. EPCC orderbook currently stands at c.RM640m, representing 4.9x orderbook cover ratio on FY17 EPCC revenue. Rohas has submitted its application to be granted Shariah compliant status and we understand that it would be admitted into the list barring any unforeseen circumstances in upcoming review this month. Maintain forecast. Maintain BUY recommendation with unchanged TP of RM1.74, based on unchanged 16x P/E multiple pegged to FY18 earnings.

Results in line. 1Q18 core PATAMI came in at RM7.8m, accounting for 15.1% of HLIB estimates. We deem the results inline as 2H is seasonally stronger. To illustrate, 1Q17 and 2H17 contributed 14.6% and 69.6% of FY17 core PATAMI respectively.

YoY: Core PATAMI increased by 60.6% mainly due to increase in deliveries of telecommunication towers and higher EPCC works done in Bangladesh and Malaysia.

QoQ: Core net profit decreased by 50.3% mainly due to lower contribution from tower fabrication segment and lower revenue recognised from the EPCC segment.

EPCC orderbook. Rohas EPCC orderbook currently stands at c.RM640m, representing 4.9x cover ratio of their FY17 EPCC revenue. This is expected to provide a strong boost to Rohas’ earnings growth for the next two years. Besides, the company is targeting for order book replenishment of RM500m this year and so far they had achieved 50% of the target YTD. We understand that bulk of the new jobs will come from Bangladesh as newly acquired HG Power Transmission (HGPT) is one of the top three EPCC companies in Bangladesh’s power transmission sector and is expected to benefit from further investment in power transmission and distribution infrastructure which is estimated at USD$20bn in order for the country to generate 60,000MW of electricity by 2041.

Shariah compliant status. Rohas has submitted its application to be granted Shariah compliant status and we understand that it would be admitted into the Shariah list barring any unforeseen circumstances in upcoming review this month.

Forecast. Maintained.

Maintain BUY, TP: RM1.74. Maintain BUY recommendation with unchanged TP of RM1.74. TP is based on unchanged 16x P/E multiple pegged to FY18 earnings. 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.

Source: Hong Leong Investment Bank Research - 24 May 2018