Period

4Q15/FY15

Actual vs. Expectations

FY15 core net profit (CNP) of RM2.2m came in grossly below expectations, accounting for only a mere 7% and 6% of our and consensus’ full-year forecasts. FY15 CNP is derived after excluding: (i) unrealised forex gain of RM5.6m, (ii) share of associates of RM25.4m, arising from one-off fair value gain of RM82.1m in DAYANG’s acquisition of PERDANA, and (iii) RM3.8m write-back of ascertained damages.

The negative variance was mainly due to lowerthan- expected margins, as we did not anticipate such severe margin compression.

Dividends

No dividend was declared, missing our expected DPS of 4.0 sen.

Key Results Highlights

YoY, FY15 CNP fell drastically by 99% underpinned by: (i) EBIT margin compression (- 26ppt to 1%) from construction cost overruns, (ii) lower revenue recognition (-37%) from its property arm as a result of lower sales coupled with slower progress billings, (iii) higher taxation (+32%), and higher financing costs (+17%).

QoQ, 4Q15 bottomline plunged further into the red to RM19.1m loss despite revenue increasing 49%. This is due to similar reasons mentioned above.

Outlook

We reaffirm our cautious view on the group’s earnings outlook after seeing the group recording two consecutive years of losses in its construction division despite a strong orderbook of RM1.0b.

As for its property division, management is adopting a cautious approach, due to the poor sentiment in the property market. The slowdown has already been felt as the group only managed to clinch RM104m new sales in FY15 (-46% YoY).

Additionally, our in-house’s cautious view on O&G sector may not bode well for NAIM’s 29.1%-stake in DAYANG (MP; TP: RM1.43).

Change to Forecasts

We are looking to review our numbers post meeting with management.

Rating

UNDER REVIEW

Valuation

Currently, UNDER REVIEW pending meeting with management. However, we do note that there could be more downside risks to our previous TP of RM1.66, while our UP call are likely to be kept.

Risks to Our Call

Higher-than-expected property sales

Higher-than-expected construction margins

Source: Kenanga Research - 1 Mar 2016