Period  4Q14/FY14

Actual vs. Expectations The 4Q14 core net profit of RM52.2m brought FY14 net profits to RM215.9m. This is below both our and consensus expectations at only 92.3% and 94.0% of full-year forecasts of RM233.8m and RM229.6m, respectively.

 The variance from our forecast is likely due to continued overseas losses from its Singapore, Australia and New Zealand businesses.

Dividends  A final NDPS of 1.1 sen was declared in 4Q14; bringing total NDPS to 3.1 sen; below our expected 3.9 sen for FY14.

Key Results Highlights QoQ, net profit increased by 5.4% mainly due to better performance in domestic operations, in particular the plant maintenance, fabrication and specialist products and services.

 YoY, net profit was on par with 4Q13 at RM52.2m, despite the revenue declining by 5.4% mainly due to lower plant maintenance and E&C activities in Singapore.

 YTD, net profit was higher by 11.7% as a result of: (i) higher E&C activities in Malaysia (the Pengerang project and Bitumen Terminal project in Tanjung Langsat), (ii) higher sales of specialist product & services in Malaysia, Middle East, India, Africa and Thailand, and (iii) increased fabrication activities in Malaysia and New Zealand.

Outlook  Pengerang Phase 1A has achieved mechanical completion on 31-Mar and received the first oil shipment on 12-Apr. The construction work for phase 1B has been completed and is now being commissioned for start-up. Phase 1C is due for mechanical completion by end- 2014.

 Phase 2 should be “good-to-go” given that the Final Investment Decision (FID) for Petronas’ RAPID project has been approved. For now, the finalised tank terminal capacity and equity stake is pending. We have already included an additional 0.72m cbm of storage capacity into our sum-of-parts forecasts from FY17 onwards.

 The Balai RSC has apparently commenced production in May-14 whilst production enhancement and re-development activities continue in Bayan field. We look to reconfirm this with management.

Change to Forecasts Our FY15-16E net profit forecasts is lowered by 1.2% and 0.2% due to the slight changes in interest income and taxation after incorporating the FY14 actual earnings.

 We are looking to fine-tune our forecasts pending further details to emerge on Phase 2 of Pengerang; Balai and Bayan developments.

Rating Maintain MARKET PERFORM

Valuation  We maintain our post-bonus CY15 SoP-based valuation TP of RM1.83 (slightly up from the RM1.77 estimated earlier).

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

 (ii) New capex intensive projects which drain cash flows.

Source: Kenanga