Result

• Boilermech Holdings Berhad (Boilermech) posted a net profit of RM6m in its 2QFY21, which jumped 158.2% qoq and 20.2% yoy. On the same note, revenue soared 100.9% qoq and 13.9% yoy to RM 64.3m.
• As for 1HFY21, Boilermech’s net profit and revenue depleted 27% yoy and 17.8% yoy respectively in view of disappointing orderbook from both Bio-energy and Water treatment segments.
• Within expectation. The Group’s 6MFY21 net profit of RM8.4m was within our expectation, accounting for 44.4% from our full year forecast given improvement of orderbook deliveries during recovery movement conditional order (RMCO) period.

Comments

• Easing MCO boosted QoQ performance. Boilermech’s revenue and PBT improved 100.9% qoq and 187.2% qoq respectively, thanks to higher orderbook deliveries from both Bio-energy and Water treatment segments during RMCO period. Bio-energy segment’s revenue and PBT increased 105.9% qoq and 172.2% qoq respectively. Besides, Water treatment segment’s revenue soared 71.1% qoq on the back of stellar PBT (+348.4% qoq).
• Better result from Bio-energy segment spurred overall YoY growth. The Group’s revenue and PBT increased 13.9% yoy and 36.8% yoy respectively on a yearly basis. Better result was underpinned by steady growth in Bio-energy segment as revenue and and PBT grew 18.8% yoy and 35.8% yoy respectively, arising from better contribution from its Solar energy business. Nevertheless, revenue for Water treatment segment slid 11.9% yoy due to lower project deliveries, despite steady PBT margin, +63.8% yoy.
• Soothing 1HFY21. Cumulatively, 1HFY21’s revenue and PBT tumbled 17.8% yoy and 15.3% yoy respectively, no thanks to slower orderbook deliveries during Covid-19 pandemic. Revenue for both Bio-energy and Water treatment segments dropped 17% yoy and 22.7% yoy respectively. Meanwhile, PBT for Bio-energy decreased 18.3% yoy but Water treatment segment elevated 36.3% given better cost control, we believe. Also, exports sales tumbled during this period, only making up 35.5% of total sales (vs 1HFY19: 56.7%).
• Outlook remains fluid. Looking forward, Boilermech is cautiously optimistic on its business performance, pinning hopes on its current orderbook secured, rebound in CPO prices as well as greater contribution from its newly acquired solar energy business. We believe its new business venture into solar energy business will boost its recurrent earnings and thus reducing reliance on its traditional business. However, we remain cautious on current spike of Covid-19 cases that could delay its orderbook deliveries. Besides, we deem current rebound in CPO prices to be temporary in view of CPO prices trading at premium to soy bean prices as well as higher outputs from producing countries which could lead to lower CPO prices.

Earnings Outlook/Revision

• No change to our earnings forecasts for FY21F and FY22F.

Valuation & Recommendation

• Maintain HOLD for Boilermech with a higher target price of RM0.80 (RM0.58 previously) after we assigned higher PE by factoring in its new solar energy business. Our valuation is now pegged at 16.7x (12.1x previously) FY22F EPS of 4.8 sen. Target P/E ratio assigned is slightly higher than +1 standard deviation of 16.5x P/E.

Source: JF Apex Securities Research - 25 Nov 2020