INVESTMENT HIGHLIGHTS

• Results within expectations, accounting for 100.1% of our estimate

• 4QFY18 contribution was lower on-year in construction segment, while PBT ration seen improving

• Precast segment still in the red

• We make no changes to earnings estimates

• We downgrade to NEUTRAL with adjusted TP of RM1.81

Results within expectation. 12MFY18 earnings of RM144.7m (+9.4%yoy) are within our expectation but lagged consensus estimate at 100.1% and 90.2% of full-year forecasts respectively.

4QFY18 contribution was lower on-year in construction segment. In 4QFY18, construction revenue fell -17.5%yoy to RM595.3m due to lower construction works recognized. This was attributable to the completion of Putrajaya Parcel F project, which the group expect to hand over in 1QFY19. During the same period, construction’s margin ratio (of PBT) improved by +3.1ppts(yoy) to 8.4%%, owing to finalisation of project’s account.

Precast segment in the red. Quarterly revenue improved by +16.3%yoy, as the group ramped up output for on-going jobs. However, its margin remained negative at -9.4%, taking the hit from declining ASP and elevated fixed costs/unit output. Notably, it recorded PBT of -RM2.9m in 4QFY18, a direct opposite to RM3.0m logged last year.

Results for full year is relatively better. The group posted higher overall revenue in FY18 at RM2.3b (+8.7%yoy), owing to better work completion. While precast recorded a decline by -7.7% in revenue, +9.9% higher revenue from construction was evidently positive to moderate the impact. During the year, we noted that progress billings were largely made up of civil works, comprising the on-going KVMRT and LRT 3 jobs.

No change to earnings estimates. Given that results were within our expectation, we make no changes to our assumptions. Its total unbilled job stands at circa RM6.0bn, which equates to an admirable 2.6x cover to FY18 revenue, and will likely sustain earnings until FY21.

Source: MIDF Research - 26 Feb 2019