Period  3Q15/9M15

Actual vs. Expectations At 42% of our FY15 (18-month period from Jan 2014 to Jun 2015) estimates, the 9M15 net profit of RM16.9m came in within expectation as we expect stronger earnings for the remaining 9 months period as earnings contribution from Cambodia increases.

Dividends  No dividend was declared in 3Q15.

Key Results Highlights 3Q15 (Jul-Sep 2014 period) net profit soared 34% sequentially to RM7.2m from RM5.4m as revenue rose 18% to RM68.5m from RM58.2m previously. This was mainly driven by Project segment which saw its operating profit surging 36% QoQ to RM12.1m on the back of 26% hike in revenue, thanks largely to higher contribution from Cambodia’s Alex Corp and Sakura projects. However, Product segment reported lower revenue of RM1.2m from RM4.6m while operating income slid to RM0.1m from RM1.2m previously, which was due to the drop in product sales to third party.

 On a YoY comparison, 3Q15 net income rose 15% from RM6.2m while revenue grew 28% from RM53.7m previously. YTD, 9M15 net profit leapt 24% to RM16.9m from RM13.6m as topline surged 44% over the same period. The main reason of stronger YoY earnings was due to the fact that most of its jobs in the current order book, which were secured within the last one year, have started to be recognised in the current period.

Outlook  Earnings for the remaining 9-month period of FY15 is expected to be stronger than the first 9 months given that billings for both Alex Corp and Sakura projects are expected to contribute more from their initial stage.

 In addition, the current order book of RM530m, from RM600m three months ago, should provide closer to two years of firm earnings visibility. Besides, PESTECH should have a fair chance of securing some of projects from its current tender book of c.RM800m.

Change to Forecasts No changes to our FY15-FY16 estimates.

Rating Maintain OUTPERFORM

Valuation  We keep our price target of RM4.36/share unchanged based on CY15 PER of 13x.

Risks to Our Call Failure to replenish orderbook.

 Cost over-runs.

Source: Kenanga