FY19 stays in red although revenue n-line with expectation, potential further impairment on P&E

TWPH’s FY revenue of RM346.3 (yoy+3.5%) largely in line with our expectation, accounted for 93.9% of our forecast of RM368.5m however earnings disappoint as anticipated turnaround didn’t materialize, FY19 posted LATMI of RM10.9m against LATMI of RM6.1m in FY18. Adjusting for non-operational items, FY19 operation shown improvement with core LATMI of RM9.4m against core LATMI of RM21.0m in FY18 after adjusting gain from land disposal in Australia of RM23.5m offset by effect of forex loss of RM9.1m.

4Q19 loss narrow yoy but widen qoq amid marginally lower revenue

4Q19 revenue slip to RM82.2m (yoy:- 5.8%, qoq:-1.6%), and posted core LATMI of RM5.9m against core LATMI of RM21.5 same quarter last year and core LATMI of RM1.0m in previous quarter. lower revenue was mainly due to reduction in sales under a major customer’s contract.

LCTWP delay proposed development, leased out the proposed development land

In view of soft property market, LCTWP delay the proposed development until the property market improve and lease out the property for rental income however rental will only contribute to the JV in FY21 as there is a twelve (12) month rent free period.

Recovery 2020 may delayed by Covid-19 outbreak

The Group has experienced several difficult years, although management has repositioned the Group for profitability however recovery in 2020 may be delayed by the Covid-19. Given the challenging outlook, we maintain our Sell recommendation at RM 0.94 pegged at P/E of 13.0x of FY20F EPS for TWPH

Source: Mercury Research - 3 Mar 2020