2Q20 below expectation, revenue down, barely breakeven

TWPH’s posted another weak quarter, revenue lower at RM73.5 (yoy:-20.8%) and PATMI of RM0.2m (yoy:-82.6%). Six (6) months cumulative results, revenue and PATMI of RM157.5m and RM2.3m accounted for 40.0% and 28.3% of our forecast respectively.

The lower revenue was due to reduction in sales under a major customer’s contract while margin improve from Indonesian operation from the revised pricing, PBT lower in line with lower revenue.

Management commented the adverse effect of Covid-19 on business shows no signs of abating in the next six months and bound for further cost saving measures and restructuring.

Recovery 2020 hampered by Covid-19 outbreak

Management’s effort to turnaround the Group appears to be hampered by Covid-19 which is still largely uncertain and remain a risk. Given the uncertainties, challenging outlook and low earnings visibility, we maintain sell recommendation with lower TP at RM 0.84 pegged at P/B of 0.4x of FY20F NTA for TWPH.

Source: Mercury Research - 25 Aug 2020