Period  1Q14

Actual vs. Expectations Below expectations. Benalec recorded a net loss of RM4.7m for its 1Q14 results which is its first ever quarterly loss. The major disappointment was mainly due to slower-than-expected marine construction work progress for the quarter and also the delayed recognition from the sale of c.180 acres of land, which is only expected to contribute from 2Q14 onwards.

Dividends  No dividend declared as expected.

Key Results Highlights YoY, Benalec reported a net loss of RM4.7m for its 1Q14 results as compared to a net profit of RM22.8m in 1Q13 underpinned by a 75% decrease in revenue from RM57.7m to RM14.4m. The disappointing performance was mainly due to the completion of a large proportion of reclamation works in Melaka back in 1Q13, and the slow work progress on its remaining orderbook of RM250m (i.e. Sentosa Cove and Pulau Indah).

 QoQ, its bottom line took a hit and recorded a net loss of RM4.7m in 1Q14 versus a net profit of RM8.0m in 4Q13. While the loss was mainly due to slow work progression on its Sentosa Cove and Pulau Indah project, there was also a lack of contribution from its previous land sales as most of the Sale and Purchase Agreement was only concluded recently.

Outlook  Despite the recent concern over the Group’s Corporate Governance issue and poor performance on its earnings, the outlook on its Johor project remains intact as the talks with 1MY Strategic Oil Terminal Sdn Bhd has been progressing well. However, we do not exclude the possibility that there would be another time extension beyond its

upcoming expiry on 11 Dec 2013 in order to fine tune the details of this particular mega project before it could be concluded.

Change to Forecasts We slashed our FY14E and 15E earnings by 32% and 21% to RM58.6m and RM72.4m, respectively as we further reduced our orderbook replenishment assumption by RM150m for FY14.

Rating Maintain OUTPERFORM

Valuation  Following our revision on FY14 earnings, we cut our SOP-based TP from RM1.94 to RM1.39.

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

Source: Kenanga