Period     3QFY13 / 9MFY13

Actual vs. Expectations     Benalec’s 9MFY13 net profit of RM54.4m came in below expectations, making up only 49% and 55% of ours and streets full year estimates, respectively. This is due to fewer than expected number of land sale transactions recognised in the year. 

Dividends    No dividend declared as expected.

Key Results Highlights     For 9MFY13, Benalec’s net profit decreased by 24% to RM54.4m despite the 41% jump in revenue. The improvement in revenue was mainly due to the progress billing from two new projects namely Pulau Indah and Swiss Horizon. The main drag for its net profit was due to the lesser number of land sales. Hence, its other income was down by 83% from RM47.1m to RM8.1m.

QoQ,  its net profit decrease by 50% to RM10.5m on the back of lower revenue (-10%) and higher operating costs. The lower revenue was due to slower progress on its Sentosa cove project, while the increase in operating cost was due to a higher administration cost.

YoY,  although revenue increased by 107% to RM59.8m, its net profit is still down 26% from RM14.2m to RM10.5m. The drop in net profit was due to slower land sales. This was reflected by lower other income, which dropped 45% from RM11.8m to RM6.5m. Moving forward, we would only expect more land sale to be recognised in FY14.

Outlook    The execution on the SPA on 12^th June 2013 for its recently signed MOU with its 1MY Strategic Oil Terminal Sdn. Bhd. on the Johor land deal would be an immediate catalyst for Benalec. Once the agreement has been finalised, we would expect that EIA Study to be approved before they could kick-start with the reclamation works in Tanjung Piai.

Change to Forecasts   Reduced our FY13 earnings estimates by 39% to RM68m as we reduced our land sale assumption for FY13 (-80%). No changes for FY14 as we expect land sale activities to be more exciting as compared to FY13.

Rating  Maintain OUTPERFORM

We are maintaining our OUTPERFORM call on Benalec given they would benefit from the development of its Johor land, from the sharp increase in land prices in the area..

Valuation     We keep our TP unchanged at RM2.08 based on SoP valuation since we have rolled over our valuation to FY14 earlier. 

Risks    Delays in executions and higher than expected building material prices.

Source: Kenanga