Ibraco’s 9M19 core PATMI of RM16.1m (+0.4% YoY) achieved 61% and 51% of ours and consensus full year forecasts. We deem the results within our expectations as we expect 4Q19 to be the strongest quarter supported by improvements from the construction segment. New sales of RM88.5m were achieved in 3QFY19, bringing 9M19 sales figures to RM280m. Unbilled sales stood at RM283m which represents a cover ratio of 1.2x. We maintain our forecast and HOLD rating with a lower TP of RM0.62 (from RM0.71) derived based on total RNAV of RM1.21 and a higher discount of 50% (from 45%) on RNAV to reflect the overall property market sentiment.

Within expectations. Ibraco reported 3Q19 core PATMI of RM6.5m (+1.6% QoQ, - 25.2% YoY), which brings the 9M19 sum to RM16.1m (+0.4% YoY). This formed 61% and 51% of our and consensus full year forecasts, respectively. We deem the results within our expectations as we expect 4Q19 to be the strongest quarter supported by turnaround from the construction segment.

Dividend. None Declared.

QoQ/YTD. 2Q19 revenue rose 40%/49.8% to RM101.1m/RM232.6m due to the higher recognitions of projects from the sale of The NorthBank Avona and shop offices in Bintulu Town Square. Core PATMI remained relatively flat at RM6.5m (+1.6%) as the losses from the construction segment dragged the improvements in property development activities.

YoY. Revenue increased 37.5% due to the higher recognition of projects. On the other hand, core PATMI declined -25.2% as the decrease in construction segment outweighed the improvement in property development activities

Contributions from Mukah Airport. We note that the loss operating losses recorded in 3Q19 is not due to a cost overrun but is attributed to an accounting treatment whereby certain expenses are recognised upfront before the recognition of revenue. Thus, improved profit recognition can be expected in 1H20 while 4Q19 should breakeven. As of 3Q19, the project stood at 51% completion and is slated for completion in mid-FY20.

New sales of RM88.5m were achieved in 3QFY19, bringing 9M19 sales figures to RM280m. Unbilled sales stood at RM283m which represents a cover ratio of 1.2x.

Forecast. Unchanged.

Maintain HOLD with a lower TP of RM0.62 (from RM0.71) derived based on total RNAV of RM1.21 and a higher discount of 50% (from 45%) on RNAV to reflect the overall property market sentiment. FY20 earnings visibility is underpinned by its unbilled sales of 1.2x cover supported by its construction arm with further potential contract awards. However, we expect earnings to be impacted by lower margins moving forward

Source: Hong Leong Investment Bank Research - 15 Nov 2019