4QFY18 revenue lower yoy but higher qoq

TWPH’s 4QFY18 revenue declined by 7.1% yoy but increased by 7.0% qoq while net profit declined by 846.7% yoy and 312.9% qoq. The revenue decline was mainly due to the absence of sales of inventory from Anzpac Services (Australia) Pty Ltd of RM 8.8m and the absence of sales of non-tobacco revenue from Tien Wah Press (Malaya) Sdn Bhd of RM 3.0m which took place in the preceding year’s corresponding quarter.

FY18 revenue and core net profit declined

For the FY18 period, group revenue declined by 17.9% and net profit declined by 107.5% respectively, while FY18 core net loss of RM13.4m declined 141.7% from FY17 core net profit of RM 32.2m. This lower revenue was mainly due to the curtailment of nontobacco revenue of about RM 70.0m from Malaysia and Australia in the previous year. The decline in core net profit was attributable to a gain from disposal of the Anzpac property of RM 23.1m together with the effect of the foreign currency translation loss in Anzpac of RM 9.1m and a one-off provision of doubtful debts of RM 6.7m in Anzpac, as well as relocation costs incurred in Indonesia.

Net profit but negative LATAMI, performance expected to recover in coming years

TWPH reported net profit of RM 2.5m, but experienced a negative LATAMI of RM 6.1m. This was because the 51% owned subsidiaries in Indonesia and Australia contributed profits to the Group, while the fully-owned subsidiaries in Dubai and Vietnam suffered losses or were flat for the year. Management guided that with the completion of relocation costs from Indonesia, Vietnam, and Dubai and closure costs from Australia, the Group should return to the black in the coming years. However, given poor market conditions and depressing outlook, we maintain our Sell recommendation at RM 0.94 at P/E of 13.0x of FY19F EPS for TWPH.

Source: Mercury Research - 1 Mar 2019