INVESTMENT HIGHLIGHTS

• 1QFY17 Results below expectations

• Transient blip from earnings

• Earnings estimates intact

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

1QFY17 Results below expectations. 1QFY17 earnings came in below expectations. VIHB’s 1QY17 earnings of RM5.2m (-72%YoY) came below with our estimates. Its net profit accounted for 5.2% of our fullyear forecasts respectively. The stark deviation was due to lower revenue recognition from projects due to progress billings and delays in certification of construction progress.

Transient blip from earnings. Despite improvement in cost of sales of RM28.5m in 1QFY17 compared to RM103.8m in 1QFY16, revenue waned from RM141.5m in 1QFY16 to RM41.0m (-72%YoY) in 1QFY17. We believe this is a transient blip and earnings would recover especially in 3QFY17/4QFY17 due to revenue transfer from its orderbook of RM1.8bn.

Earnings estimates intact. We make no variations to our assumption as we believe that FY17/FY18 could be a better year for VIHB to recognize its billings for is orderbook level. We reckon that in FYE17 VIHB would struggle to maintain its FY16’s profit margin of 14.7%, because of its project profile i.e. public housing projects.

Recommendation. We reaffirm our BUY recommendation with TP of RM0.40 per share based on discounted cash flow (DCF) with WACC of 7.4%.Our target price implies an enticing +296% upside backed by an undemanding current PER of 9.5X.

Source: MIDF Research - 1 Jun 2017