Journey to Wealth
Benalec - OUTPERFORM - 31 May 2012
Period 3Q12/9M12
Actual vs. Expectations
3Q12 results are deemed to be within our expectations despite it being slightly higher than our numbers as we expect a weaker 4Q12 due to likely one-off expenses.
The 9M12 net profit currently made up 84% and 73% of ours and the consensus' full year FY12 forecasts.
Dividends No dividend was declared during the quarter.
Key Result Highlights
QoQ, 3Q12 net profit fell by 51% despite an 8% increase in revenue. The lower net profit was mainly due to a one-off gain recognised in 3Q11 in relation to the acquisition of a new subsidiary.
YoY, the revenue and net profit drop by 12% and 2% respectively. This was mainly due to higher reclamation cost spent in the period for the DMDI project in Melaka. There will be no revenue and profit being recognised until the disposal of the land to the buyer. That said, the completion of the land sale is expected in 2HCY12.
Management has guided that there will be additional cost to be incurred in the 4Q12 results due to ESOS exercise costs.
Outlook Management is actively looking for more reclamation works in Sarawak and Peninsular Malaysia. As the development in Samalaju Industrial Area is quite encouraging, we believe that there will be a lot more marine construction and vessel chartering contracts available for Benalec.
The recent TNB contract will provide about RM4m to RM5m to Benalec's pre-tax profit per annum starting from May 2012 to April 2015, which we have already imputed for in our estimates.
Forecasts No changes in our FY12 and FY13 forecasts.
Rating OUTPEFORM
Maintain OUTPERFORM given the ample upside potential to our Target Price from the current share price.
Valuation There is no change to our Target Price of RM2.37 based on SOP valuation.
Risks A slowdown in land sale (reclaimed land).
Source: Kenanga
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