1QFY21 Core Net Profit (CNP) of RM105.9m (+83% YoY, - 26% QoQ) came in at 29%/31% of our/consensus full-year estimate. We deemed the results broadly within our expectation with possible negative impacts, going forward, from the re-imposition of lockdown in several countries especially Malaysia starting mid-May 2021 as well as higher O&M costs and lower associates’ income from Malakoff. Maintain MP with unchanged TP of RM1.05.

1QFY21 Within our expectation. 1QFY21 Core Net Profit (CNP) of RM105.9m (+83% YoY, -26% QoQ) came in at 29%/31% of our/consensus full-year estimate. We deemed the results broadly within our expectation with possible negative impacts, going forward, from the re-imposition of lockdown in several countries especially Malaysia starting mid-May 2021 as well as higher O&M costs and lower associates’ income from Malakoff. No dividend was declared for the quarter as they typically announce final dividend before the release of the annual report.

YoY, 1QFY21 core CNP excluding one-off sublease PTP land gain sale (RM18.7m) rose 83% to RM105.9m, mainly due to stronger volume handled at PTP and NMB which coincided with the gradual re-opening of the world economy since the pandemic early last year, as well as lower effective tax rate at 27.6% compared to 36.4% in 1QFY20. These mitigated the lower profit from associates (-8%) namely Malakoff, primarily driven by the higher O&M costs for planned outages and lower fuel margin at a total of RM23m for TBE and TBP plants as well as the lower associates’ income by 32% or RM13.0m, which were hit by planned outages at Shuaibah and HPC plants netted off by higher earnings from Alam Flora. Additionally, Engineering segment recorded lower revenue (-13%) from lower work progress from KVMRT-SSP line due to completion of tunneling works in 4QFY20 and impact of Covid- 19.

QoQ, 1QFY21 core CNP decreased by 26% with overall weak sales (- 12%) and higher effective tax rate at 27.6% compared to 24.6% in 4QFY20. Overall weaker QoQ results was from weaker associates (- 5%), and significantly lower Engineering segment contribution (-35%) as mentioned above. There was no sale of Senai Airport City land recognized during the quarter.

Outlook. The Port and Logistics division has been showing improvement in performance, underpinned by economic recovery momentum since the resumption of the global and domestic trade activities. Currently, its ports portfolio consists of PTP, Johor Port, Northport, Penang Port and Tanjung Bruas Port. That said, we do not discount management continuing their pursuit to acquire additional ports to boost their profile as the largest port operator in the country. We gathered that while its construction order-book is currently at c.RM4.9b (90% from MRT Line 2, expected to be completed by 2022), management is actively bidding for new projects in order to meet its targeted order-book replenishment of c.RM500m p.a.

Maintain MP with unchanged SoP-derived TP of RM1.05. Risks to our call include: (i) lower-than-expected ports activities, (ii) slower- than-expected construction progress, and (iii) lower-than-expected associates’ contribution.

Source: Kenanga Research - 25 May 2021