U/G to tactical BUY; MYR1.70 TP (unchanged)

4QFY23 headline net loss of MYR4m dragged 12M into the red (-MYR2m). Ex- one-off, core loss was higher at MYR6m for 4Q, MYR7m for 12M. The miss was due to a slower-than-anticipated pick-up in construction works, while taxes were much higher. We tweak FY24/25E core net profit and introduce FY26E. We think the worst could be behind it, in terms of cost for its existing projects. U/G to tactical BUY with an unchanged MYR1.70 TP (0.7x FY24E P/B; -1.5SD of LT mean; also its low in early-2012).

Losses at MY construction op offset profits at SG

FY23 group revenue made up 96% of our forecast with just a 6% QoQ pick- up in construction rev. in 4Q (-33% YoY), while PBT margin was subdued at 2.2% in 4Q. Manufacturing rev. was slower in 4Q (-11% QoQ/YoY) on lower ASPs and volume; the op posted a marginal loss on high inventory cost of tin plates. Group tax was exceptionally high in 4Q due to deferred taxes. For 12M, construction posted a MYR5m loss as rev. fell 28% YoY (reduced activities and more competitive rates for new contracts) and provision for losses due to higher costs. Losses at MY construction offset profit at the SG op. 12M manufacturing profit was lower YoY despite higher revenue (+6%) due to high production cost. A final 3sen DPS lifts FY23 DPS to 5sen.

Cautiously optimistic for FY24E

Outstanding orderbook was MYR230m end-Jun 2023 (vs. MYR240m end-Jun 2022), implying MYR280m new jobs in FY23. Into FY24, challenges, as per management, are reasonable margins from jobs secured and rebuilding the orderbook with profitable jobs. Sector wise, the outlook is better on expectation for the KVMRT3 awards and an improved pipeline in SG in 2HCY24 with the start of key projects like Changi T2 extension, T5, Marina Bay Sands & Resorts World extension. Tin-plate prices are also coming off.

Tweaking earnings forecasts

We tweak FY24/25E earnings by +1%/+0.3% post house-keeping. Cost wise, we think the worst is behind it for its existing projects having made the necessary provisions. The main challenge now is orderbook replenishment – we have pencilled in MYR300m in FY24E. Positively, balance sheet remains in a net cash of MYR115m (70sen/shr) end-Jun 2023. [Prior:HOLD]

Source: Maybank Research - 26 Aug 2023