Rohas’s 1QFY22 core PATAMI of RM6.8m was better than expected due to stronger contribution from both EPCC and tower segments. Going forward, we continue to expect a better year for Rohas with broad recovery in its business segments. Increase FY22/23 earnings by 25.1%/45.5%. Upgrade to BUY with higher TP of RM0.32 post-earnings revision. Our TP is derived by pegging mid FY22 EPS to 8x P/E multiple. With results posting a positive surprise, coupled with weak share price performance (-20% YTD), we reckon the stock is ripe for a rebound trading at FY22/23/24 P/E multiple of 6.6x/5.6x/6.0x.

Above expectations. Rohas reported 1QFY22 results with revenue of RM138.0m (+124.7% QoQ, +152.9% YoY) and core PATAMI of RM6.8m (+7.3% QoQ, core LATAMI of -RM2.1m in 1QFY21). Results beat our expectations making up 50% of our full year forecast. No EIs were assumed for the quarter.

Dividends. No Dividends Were Declared.

Deviations. Results beat due to stronger than expected top-line contribution from both EPCC and tower segments.

QoQ. Core PATAMI increased by 7.3% driven by higher revenue (+125%) due to both higher EPCC progress and higher pent up tower deliveries delayed by flooding in 4QFY21. The higher EPCC progress was brought about by ramp up in work progress and clearance of supply chain bottlenecks from last year. However, its core performance was slightly offset by weaker contribution from associates (-69.7%) as its mini-hydro in Lawe Sikap normalised downwards.

YoY. Performance turned profitable from -RM2.1m in 1QFY21 as a result of stronger contribution from both EPCC and tower segments. Recall that 1QFY21 was also marred by the imposition of MCO2.0.

Outlook. Estimated outstanding orderbook for EPCC segment stands at c.RM350- 400m which translates into 2.1-2.4x cover ratio of FY21 EPCC revenue (low base). Tower fabrication orderbook stands at about c.RM170m, representing c.3.5x cover ratio on FY21 tower fabrication revenue. This includes its recently secured EPCC contract in Nepal worth RM65.6m. We expect both EPCC and tower segment to normalise slightly downwards as order backlogs reduce. Overall, Rohas is on track for a much improved year in FY22.

Forecast. Increase FY22/23 earnings by 25.1%/45.5%. Introduce FY24 earnings of RM19.1m.

Upgrade to BUY, TP: RM0.32. Upgrade to BUY with higher TP of RM0.32 post earnings revision. Our TP is derived by pegging mid-FY22 EPS to 8x P/E multiple. With results posting a positive surprise coupled with weak share price performance (-20% YTD), we reckon the stock is ripe for a rebound trading at FY22/23/24 P/E multiple of 6.6x/5.6x/6.0x. Key upside risks: pick up in contract flows. Downside risks include higher steel prices, labour shortages and execution risks.

Source: Hong Leong Investment Bank Research - 31 May 2022