INVESTMENT HIGHLIGHTS

• Results met expectation

• Positive numbers but cautious on pre-cast segment sales

• Earnings forecast remains intact

• Altogether, we reiterate our NEUTRAL recommendation with TP of RM1.74 per share

Results met expectations. FY16 earnings of RM123.6m (-3%YoY) earnings met expectations. Its net profit accounted for 96% and 98% of ours and consensus’ full-year forecasts respectively. The minimal deviation from FY16 results was due to completion of KVMRT project Package V4, Section 17, Petaling Jaya.

Construction segment supported positive results. Its FY16 earnings are largely contributed by the improvement in construction segment accounting for RM95.5m (+49.6% YoY) or 62% of PBT. But, considering the precast segment experiencing a setback of RM58.2m (- 24% YoY) amounting to only 37.8% (-16.8 ppts YoY) of PBT, we are cautious on the prospect of orders of new products from pre-cast segment such as pre-fabricated bathroom units (PBFU) sales to Singapore’s Housing Development Board (HDB) despite the consequent impact of progress billings from its orderbook of RM4.8bn.

Impact on earnings. We make no changes in our earnings estimates; we will strongly consider revising our valuation if the prospect of sales of pre-cast segment product to Singapore improves from higher HDB unit launches. The current compression of PBT of pre-cast segment is attributable to fluctuating steel prices.

Recommendation. Altogether, we maintain our Neutral recommendation with an SOP-based target price of RM1.74 per share.

Source: MIDF Research - 24 Feb 2017