Period  4Q13/FY13

Actual vs. Expectations

 Below expectations. The group reported 4Q13 PATAMI of RM109.1m, taking its FY13 PATAMI to RM681.2m which made up only 74% and 75% of our and consensus full year estimates, respectively. The key negative deviations were lower-than-expected sales of Toyota vehicles units (actual units sales at c.91k vs. our previous forecast of c.96k) coupled with higher selling and distribution expenses from advertising and promotional (A&P) activities.

Dividends  Below expectations. A third interim single-tier dividend of 9.0 sen per share was declared for the quarter under review (totalling 44.0 sen vs 50.0 sen in FY13, and our estimates and consensus of 60.0 sen and 51.1 sen, respectively). All in, YTD dividend DPS of 44.0 sen represented a dividend payout ratio of c.75%, which also implies 3.7% net dividend yield.

Key Result Highlights

 YoY, FY13 revenue declined by 10% due to lower revenue contributions across the Automotive and Equipment segments. Meanwhile at the EBIT level, margin dropped by 2.8ppts to 9.2% mainly dragged down by higher selling and distribution expenses amidst aggressive advertising and promotional (A&P) activities in the Automotive segment, thus sending EBIT lower by 32%.

 QoQ, 4Q13 revenue increased 13% driven by the Automotive segment on the back of higher sales of Toyota Vios. Meanwhile at the EBIT level, margin increased by 2.4ppts to 7.8% driven by the higher operational efficiency amidst higher vehicle sales.

 Automotive: FY13 revenue declined by 11% as the lower Toyota sales volume (-13%) due to the stiff competition from other car manufacturers coupled with the Vios model run-out in September offset the higher Perodua sales which grew 12%. Coupled with the higher selling and distribution expenses amidst aggressive A&P activities, PBT declined by 21%.

 Equipment: FY13 revenue weakened by 20% mainly due to the lower demand caused by softer construction sector coupled with the drop in palm oil, iron ore and gold mining activities amidst the lower commodity prices. Despite the lower revenue, PBT increased by 4% on the back of better margins.

 Oil & gas: FY13 revenue inched up 2% as the revenue shortfall on the expiration of a semi-submersible rig contract for Hakuryu 5 was offset by the new contribution of NAGA 4 and higher contribution from NAGA 1 and NAGA 2. Of noteworthy, PBT soared by 146% underpinned by: (i) new contribution from NAGA 4 and higher contribution from NAGA 1 and NAGA 2 and (ii) recognition of gain upon completion of property sale (c.RM42m).

 M&E: FY13 revenue improved by 8% due to the higher demand for its lubricant products. Note that the segment recorded a LBT of RM36m caused by the continued slump in the automotive industry in India and impairment of assets.

Source: Kenanga