Boilermech Holdings Berhad reported a net profit of RM4.80m in 2QFY18 which surged 30.7% y-o-y and improved 2.9% q-o-q. Meanwhile, the Group recorded a quarterly revenue of RM55.8m, which increased by 2.4% y-o and 22.8% q-o-q. The better performance in 2QFY18 was underpinned by growth in both Bio-energy and water treatment segments. However, 6MFY18 net profit dropped by 5.9% y-o-y to RM9.5m.
Broadly within expectations – The Group 6MFY18’s net profit was broadly within our and consensus expectation by matching 38.3% and 38% of full year earnings estimates respectively as we expect stronger 2H with the newly secured order book is expected to contribute during the period.
Comments
Bio-energy segment performed well – Bio-energy segments in 2QFY18 recorded a higher revenue growth of 23.3% q-o-q and minor growth of 0.6% y-o-y while operating profit in Bio-energy segments elevated by 5.1% q-o-q and 26.8% y-o-y. We believe the better performance was underpinned by high order book secured by the Group in this quarter.
Stellar 2QFY18 performance for Water treatment division – Water treatment segmental revenue in 2QFY18 also recorded a robust growth of 19.8% q-o-q and 17.8% y-o y. Besides, the operating profit posted a growth of 11.4% q-o q and 153.9% y-o-y.
Disappointing 1HFY18 given lacklustre performance in Bio-energy segment – The Group’s 1HFY18 revenue decreased by 12.9% yoy to RM101.2m due to lower contribution from Bio- energy segment (revenue -14.9 % y-o y). Similarly, 1HFY18’s operating profit dropped by 6.4% y-o-y given Bio-energy segment’ 1HFY18 operating profit down 6.1% y-o-y. We believe the lacklustre performance was due to timing difference of recognition of new orders (normally it takes one year to deliver) and hence expects 2H to be stronger.
Earnings Outlook
We retain our earnings forecasts for FY18 and FY19 in view that the earnings will be boosted by secured order book under Bio-energy segment.
Valuation/Recommendation
Maintain HOLD call for Boilermech with an unchanged target price of RM0.91. Our fair value is based on 19x FY2018F PE. The PER assigned for valuation is closed to its 3- year historical average PE.
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