Period 4Q15/FY15
Actual vs. Expectations At 61% of our FY15 estimate (18-month period from Jan 2014 to June 2015), the YTD 12M15 net profit of RM24.3m came in within expectation as we expect stronger earnings for the remaining six months as earnings contribution from Cambodia and Sakura increases.
Dividends 4.0 sen NDPS was declared; totaling YTD NDPS to 10.0 sen which is slightly higher than our assumption of 9.8 sen.
Key Results Highlights 4Q15 net profit rose 3% QoQ to RM7.4m from RM7.2m although revenue dipped 3%. This was mainly attributable to a broad-base margin improvement with operating margin at Project segment improved 2% to 20% as Cambodia’s Alex Corp and Sakura projects are well in progress. As such, Project’s EBIT improved 5% to RM12.7m despite topline declining 7% over the quarter. Meanwhile, the Product segment posted higher operating profit of RM1.0m from RM0.1m after a higher revenue of RM4.1m from RM1.2m, thanks largely to higher OEM products manufactured for Siemen.
YoY, 4Q15 net earnings grew 4% from RM7.1m as revenue rose 7% from RM62.3m previously. YTD, 12M15 net income jumped 17% to RM24.3m on the back of a 31% hike in revenue as jobs that were secured in the past one year started to be recognised.
Outlook Earnings for the remaining 6-month period of FY15 is expected to remain strong given that billings for both Alex Corp and Sakura projects are expected to contribute more from their initial stage.
The current order book of RM500m, from RM530m three months ago, should provide closer to two years of firm earnings visibility. In addition, PESTECH is tendering for RM1.6b work of jobs of which it has a fair chance of securing some.
Change to Forecasts No changes to our FY15E-FY16E numbers.
Rating Maintain OUTPERFORM
Valuation We keep our price target of RM4.36/share unchanged based on CY15 PER of 13x.
Although the total upside potential is only 3%, we still keep our OUTPERFORM call unchanged on expectation of major contract flow in the next few months.
Risks to Our Call Failure to replenish orderbook.
Cost over-runs.
Source: Kenanga
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