Period

4Q15/FY15

Actual vs. Expectations

FY15 core net profit (CNP) of RM47.5m came in above our expectation but lower than consensus, accounting for 108%/86% of expectations. Our CNP is derived after excluding: (i) net loss on financial assets at fair value of RM9.5m, and (ii) unrealised forex gain of RM18.0m.

The variance was due to higher-than-expected revenue recognition due to our conservative construction billings while we reckon consensus could have been overly cautious on their finance cost assumptions.

Dividends

A final tax exempted dividend of 0.5 sen (0.7% yield) has been declared, which came in below our estimates of 2.0 sen.

Key Results Highlights

YoY, FY15 CNP was up 41% alongside the revenue growth of 78% underpinned by the growth from Middle East (+54%), India (+60%), Malaysia (+36%) and the O&G division (415%), coupled with a lower tax expense (-36%). That said, its O&G segment performed exceptional well registering 18x growth in pre-tax profits of RM27.5m.

QoQ, 4Q15 CNP surged 195%, inline with the growth in revenue (+4%) buttressed by higher billings from their Middle Eastern projects, which displayed improved pre-tax margins (+5ppt to 10%) due to a higher margin job mix.

Outlook

YTD, the group has secured RM1.7b new contracts, surpassing our FY16E full-year new contracts assumption of RM1.5b by 13%. Its outstanding orderbook currently stands at c.RM1.7b providing earnings visibility for c.1-1.5 years.

SENDAI had proven to be able to secure superior orderbook growth (+49%) from FY14. Moving forward, SENDAI is still eyeing for more jobs both overseas and locally given its massive tenderbook size of RM25.0b of which the bulk is from the Middle East. On the local front, we believe that SENDAI are still running for RAPID and KL118 jobs.

Change to Forecasts

No changes to our earnings at this juncture, pending a review post briefing on 3rd March 2016 (Thursday).

Rating

UNDER REVIEW

Valuation

We are looking to review our call and TP price (previously, OP; TP: RM0.92) post analyst briefing. Likely to be downward bias due to growing concerns in the Oil & Gas industry.

Risks to Our Call

Lower-than-expected margins.

Lower-than-expected orderbook progress.

Lower-than-expected new contracts.

Forex fluctuation risks.

Source: Kenanga Research - 1 Mar 2016