We recently met up with Rohas’ management. 2 legacy projects that contributed to the shocking loss of 4Q18 results are finally completed and all costs have been incurred with no more provision related to those projects going forward. Tower division outstanding orderbook currently stands at c.RM140m, translating into 0.92x of FY18 tower revenue. EPCC orderbook stands at RM650m, translating into 2.75x of FY18 EPCC revenue. Sarawak is dishing out awards to construct 300 telco towers this year with total costs (including EPCC and tower costs) of RM1bn. It is expected to be divided into 4 work packages and Rohas is confident to secure telco tower orders from 3 work package contractors. Maintain forecast and HOLD rating with unchanged TP of RM0.60 (11x FY19 earnings).

Below Are the Key Takeaways From Our Recent Meeting With Rohas’ Management.

Legacy projects completed. 2 legacy projects that contributed to the shocking loss of 4Q18 results are finally completed and all costs have been incurred with no more provision related to those projects going forward. Normalized earnings of HGPT are guided to stand at c.RM10m p.a. and should revert back to that level going forward.

Beneficiary of electricity retail sector. Recently, the Government has been studying proposals regarding liberalisation of the electricity retail sector to allow users to choose electricity suppliers. Rohas is expected to benefit if the proposal materializes due to increase demand for transmission towers arising from higher household connections.

Outstanding orderbook. Tower division outstanding orderbook currently stands at c.RM140m, translating into 0.92x of FY18 tower revenue. EPCC orderbook stands at RM650m, translating into 2.75x of FY18 EPCC revenue.

Laos EPCC. Laos EPCC contract (RM300M) completion rate is at c.30% (RM90m) and the company is targeting to achieve at least 70% completion rate by end FY19.

Prospect from Sarawak. Sarawak state is dishing out awards to construct 300 telco towers this year with total costs (including EPCC and tower costs) of RM1bn. It is expected to be divided into 4 work packages and Rohas is confident to secure telco tower orders from 3 work packages contractor. At the same time, Rohas is also trying to bid for EPCC contract for those packages.

Acquisition in Cambodia. Recent acquisition of Global Tower Corporation (GTC) in Cambodia opens up opportunities for them to undertake EPCC contract to construct telco towers and to own telco tower assets. Data traffic growth for 4G is expected to increase steadily at a CAGR of 13.8% for the next 10 years and hence, this acquisition enables Rohas to ride on this positive trend.

Mini-hydro to contribute this year. Rohas 49%-owned 7MW Lawe Sikap mini hydropower plant in Indonesia is expected to start contributing in 4Q19, a delay from 2Q19 due to unusual raining reason. The net contribution to Rohas is c.RM4m annually based on our estimates.

Forecast. Maintained as the meeting yielded no major surprises.

Maintain HOLD, TP: RM0.60. Maintain HOLD with unchanged TP of RM0.60. TP is pegged to 11x P/E multiple to FY19 earnings.

Source: Hong Leong Investment Bank Research - 12 Jul 2019