INVESTMENT HIGHLIGHTS

• FY16 results below expectations

• PATAMI affected by higher cost and expenses

• Earnings estimates for FYE17/FYE18 intact

• Altogether, we reiterate our BUY stance with TP of RM0.40 per share

FY16 results below expectations. FY16 earnings came in below expectations. VIHB’s FY16 earnings of RM53.9m (+755%YoY) came below estimates. Its net profit accounted for 74.5% of both ours and consensus’ full-year forecasts. The deviation was due to higher mobilization cost, administration expenses and finance cost from expanding orderbook.

PATAMI affected by higher cost and expenses. Despite higher revenue (+270%yoy) from RM98.6m in FY15 to RM365.0m in FY16, VIHB’s bottomline suffered from transient setback due to cost transfer (refer to our previous report 30.11.2016).This is inevitable due to its large orderbook size of RM1.8bn.

Earnings estimates intact. We make no changes to our forward assumptions as we believe FY17/FY18 could be better years as VIHB recognizes its orderbook billings. However key execution risk remains a factor to watch. Notably, VIHB maintained high profit margin of 14.7% in FY16, but consistent margin profile remains a challenge in FY17 as VIHB is focusing its effort on affordable housing projects which attract lower margin.

Recommendation. We reaffirm our BUY recommendation with TP of RM0.40 per share based on discounted cash flow (DCF) with WACC of 7.4%.

Source: MIDF Research - 1 Mar 2017