Pecca reported 4QFY19 PATMI at RM2.9m (-45.2% QoQ; +18.4% YoY) and FY19 PATMI at RM17.7m (+64.2% YoY), within our expectation. The stronger earnings were mainly attributed to higher sales volume (driven by higher Perodua demand) and improved operational scale. Maintain BUY recommendation with unchanged TP of RM1.40 based on unchanged 13x P/E on FY20 EPS, given its strong operational cash flow of RM22-25m per annum (FY20-21) with current net cash position of RM92.8m (50.6sen/share).

Within expectations. Reported a core PATMI of RM2.9m (-45.2% QoQ, +18.4% YoY) for 4QFY19, bringing FY19 to RM17.7m (+64.2% YoY), achieving 103.0% of our FY19 forecast and 97.5% of consensus.

Dividend. No dividend was declared pending AGM. We expect a final dividend of 3.0sen/share, making full year dividend of 5.5sen/share or dividend yield of 4.3% for FY19.

QoQ. Core earnings dropped 45.2% QoQ despite flattish revenue, reflecting compressed margin, due to higher cost in relation to selling and distribution expense and administrative expense.

YoY/YTD. Following revenue growth on higher sales volume (attributed to strong demand from Perodua on Myvi model as well as the new Aruz), core PATMI improved by 18.4% YoY and 64.2% YTD, on higher sales volume and improved operational scale. Group EBITDA margin improved to 18.5% in FY19 as compared to 13.0% in FY18.

Outlook. Pecca is expected to continue to leverage on major client Perodua sales growth, for the continued strong demand for Myvi model and Aruz model. The upcoming launch of updated Axia model will also be contributing positively to Pecca.

Forecast. Unchanged.

Maintain BUY, TP: RM1.40. Maintain BUY recommendation on Pecca with unchanged TP of RM1.40 based on unchanged PE 13x of FY20 profit. We remain positive on Pecca’s strong operating cash flow of RM22-25m per annum (for FY20-21) on top of its current net cash position of RM92.8m (translating into 50.6 sen/share).

Source: Hong Leong Investment Bank Research - 26 Aug 2019