Period

6Q15/18M15

Actual vs. Expectations

The 6Q15 results came within our expectation with 18M15 core net profit of RM42.1m coming 4% above our estimate but beating market consensus by 10%.

The reported FY15 net profit was RM56.5m which included a RM14.5m unrealised forex gain.

Dividends

No dividend was declared during the quarter. However, we understand that the company is likely to declare the final dividend for FY15 in the upcoming board meeting in Oct.

Key Results Highlights

6Q15 core net profit leapt 31% QoQ to RM10.1m from RM7.7m while revenue jumped 21% to RM88.9m from RM73.3m, thanks to better margin as the projects at different progress stage for: (i) Sakura substation work, which was already completed in Jun, (ii) one foreign project, and (iii) substation works for NUR, Mambong and Mapai.

As there is no comparative 6Q14 number, we compared 6Q15 (Apr-Jun 2015) to the same period last year, Apr-Jun 2014 (which is 2Q15); net profit surged 89% from RM5.4m to RM10.1m on a 53% hike in revenue from RM58.2m from RM88.9m previously as jobs that were secured in the past 1-1½ years started to be recognised.

Outlook

The newly awarded Cambodia concession business offers a guaranteed recurring income for 25 years in contrast to its existing business where contracts only last for 2-3 years. This could easily contribute RM16m-RM20m/year to PESTECH's bottom-line from 2020 onwards. This is substantial to PESTECH judging from its net profit of RM24.3m in Jan-Dec 2014.

Meanwhile, its current orderbook of c.RM723m should keep them busy until end-2017.

Change to Forecasts

No changes to our FY16E-FY17E numbers.

Rating

Maintain OUTPERFORM

Valuation

Price target of RM6.11/SoP maintained. This is based on: (i) CY16 16.6x PER (+1.5 SD 3-year mean) on existing business, and (ii) FCFF @ 7.2% discount rate on the Cambodia BOT.

Risks to Our Call

Failure to replenish orderbook.

Cost over-runs.

Source: Kenanga Research - 1 Sep 2015