1QFY20 – revenue up 16.2% yoy while core net profit down 13.4%

Atlan 1QFY20 posted higher revenue of RM198.2m (1QFY19: RM170.5m) mainly due higher revenue from Duty Free and Automotive business division. In spite of higher revenue, earnings hit by higher operational cost in Duty Free segment and lower yield in Property and Hospitality business division.

Duty Free Segment – Higher revenue and operational expenses

Duty Free remained core business division for the group, represent 68.3% of Group’s total revenue, posted higher revenue of RM135.3m for 1QFY20 (1QFY19: RM117.1m). The higher revenue was attributed to newly acquired Brand Connect Group and higher demand for certain products. Duty Free registered PBT of RM9.3m (1QFY19: RM11.7m) lower by 20.1% yoy, earnings hit by higher operational cost such as payroll cost increase by RM1.7m, professional costs increase by RM0.8m and transportation costs increase by RM0.7m.

Maintain Buy with lower Target Price

Given then challenging outlook and increasingly competitive business environment, business performance of Atlan is expected to remain soft and challenging accordingly we revised our estimate to factor in lower revenue growth and higher operational cost. Nevertheless, we continue favor Atlan for its resilient earnings and sustainable dividend payout. We maintain BUY recommendation with lower target price of RM4.88 based on SOP valuation.

Source: Mercury Research - 16 Jul 2019