Period  3Q14/9M14

Actual vs. Expectations The 3Q14 core net profit of RM49.6m brought 9M14 net profits to RM163.6m. This is within our expectations at 70.0% of full-year forecasts of RM233.8m but below consensus expectations at 67.6% of RM241.9m.

Dividends  An interim NDPS of 1.1 sen was declared, similar to the amount in 3Q13.

Key Results Highlights QoQ, net profit declined by 25.4% mainly due to lower contributions from joint ventures. To recap, there was an exceptional joint-venture income of RM16m in 2Q14.

 YoY, net profit was higher by 6.0% mainly due to: (i) stronger sales of specialist products & services in Middle East, India, Africa and Russia, (ii) increased fabrication activities in New Zealand, and (iii) better net profit margin from international operations.

Outlook  Phase 1A Pengerang CTF has kick-started operations and received its 1st shipment in Apr-14. Phase 1B and Phase 1C are expected to be completed in mid-2014 and end-2014 respectively.

 The terms (i.e. equity stake and storage details) for Phase 2 should emerge soon given that the Final Investment

Decision (FID) for Petronas’ RAPID project has already been reached in early-Apr. We have already included an additional 0.72m cbm of LNG storage capacity into our sum-of-parts valuation from FY17 onwards, but further capacity expansions are yet to be factored in.

 The Extended Well Testing (EWT) programme for the Balai RST is ongoing. Upon successful completion of the predevelopment phase and assessment of the project viability of the field, BCP will progress to the field development planning phase. We have only expected earnings contributions from FY17, and as such, any project acceleration would be a further earnings catalyst.

Change to Forecasts As earnings are within expectations, there are changes in our FY14-15E estimates.

Rating Maintain MARKET PERFORM

Valuation  We maintain our CY15 SoP-based valuation TP of RM3.92.

 Ex-special share dividend and bonus issue, under the maximum scenario (post ESOS and warrant conversion), our TP could be RM1.77.

Risks to Our Call  i) Delay in its in-house EPCC jobs and projects; and

 (ii) New capex intensive projects which continue to be a drain on cash flows.

Source: Kenanga