Period  1Q14

Actual vs. Expectations Reported 1Q14 core net profit of RM11.1m which accounted for 14.3% and 15.7% of our and consensus full-year FY14 forecasts of RM77.6m and RM70.7m, respectively.

 We deem the results as within expectations as the 1H of the financial year is typically weaker on seasonal factor due to the monsoon season.

 We have restated BARAKAH’s earnings to include: (i) the one-off gain on disposal of subsidiary Vastalux Energy Bhd, (ii) one-off impairment loss on goodwill and, (iii) its IPO listing expenses.

Dividends  No dividend was declared as expected.

Key Results Highlights

 QoQ, revenue declined by 5% to RM82.8m mainly due to a decrease in the turnover generated from installation and construction segment as there was lesser revenue generated from barge chartering and T&I projects in the current quarter.

 YoY, 1Q14 core net profit was down by 30.9%, mainly due to lower barge income and higher administrative costs as the company built up its orderbook and went for a public listing last year.

Outlook  Management guided that 1H14 results could be seasonally lower due to the monsoon factor. However, things will pick up in 2H14 on the back of higher installation and construction activities.

 The secured orderbook stands at RM2.24b which provides earnings visibility for next three years. We understand that BARAKAH has been actively involved in bidding for new projects with its current tender book of RM3.0b, comprising 70 oil and gas projects.

 We believe that the commissioning segment is able to provide Barakah stable earnings as it has a 90% win rate in the commissioning market every year with its excellent track record.

 Besides that, Barakah is looking to secure T&I international work from the Gulf Region through its existing joint-venture partner in Saudi Arabia, which is expected to be awarded this year.

 Additional growth for the T&I segment will hinge on BARAKAH’s future asset expansion. We understand that the company might expand the asset base in line with the expansion in contracts awarded.

Change to Forecasts Due to change of financial year end (from FYE September to FYE December), we have adjusted our FY14E and 15E forecasts to RM111.5m and RM130.8m.

Rating Maintain OUTPERFORM.

Valuation  We maintain our target price of RM1.98, which is based on an implied target PER of 13x on CY15 EPS of 15.2 sen.

 We believe our valuation for BARAKAH is still reasonable as we are valuing it at a 13.3% discount to the 15.0x PER ascribed to industry peers such as ALAM (OP; TP: RM2.07) given its smaller asset base (it currently owns only one pipelay support vessel).

Risks to our call (i) A downturn in the oil & gas sector could result in delays in contract rollouts. (ii) Delay in the Pan-Malaysia’s T&I project, which will reduce the potential earnings being factored in our forecasts. (iii) Lower-than-expected margins.

Source: Kenanga