Period  4Q13 / FY13

Actual vs. Expectations  Benalec’s FY13 core net profit of RM62.4m came in below expectations, making up only 91% and 85% of our and streets’ 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 FY13, Benalec’s core net profit decreased drastically by 25% to RM62.4m due to the lesser number of land sales which only account 5.7% of its total revenue coupled with the poor performance in its vessel chartering division, which saw widening losses from RM7.8m to RM19.4m. To recap, the total transacted land sale fell 89% from RM133.2m to RM15.1m.

 QoQ, its core net profit fell by 25% to RM8.5m due to slower progress of its Pulau Indah project coupled with an increase in operating cost caused by higher administration costs. Hence, the EBIT margin was down by 28ppt to 4%.

 YoY, its core earnings came down by 26% from RM10.6m to RM8.5m due the absence of land sales in 4Q13.

Outlook  We are still waiting for more positive development on its Johor land reclamation project, which has yet to get any approval on its Environmental Impact Assessment (“EIA”) studies. However, we believe that Benalec would be able to conclude its Johor project before the expiration on the extension of time on 11th Dec 2013.

Change to Forecasts  We are reducing our FY14 earnings estimates by 23% to RM86.6m as we further factored in higher operational costs and lower contribution from its vessel chartering and ship building division.

Rating   Maintain OUTPERFORM

 We are maintaining our OUTPERFORM call on Benalec given they could possibly benefit from the development of its Johor project. However, if they are unable to meet the upcoming extension of time which is set to expire on 11th Dec 2013, we would possibly downgrade our TP and rating.

Valuation  Following our revision on FY14 earnings, we trimmed our SOP-based TP from RM2.01 to RM1.94.

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

Source: Kenanga