Gone with the wind - Protasco Bhd dismantled?

Protasco Bhd Sarawak concession cut from 100% to 30%. Income discounted 70%? What happened? - BlueChipReport

ckpsarawakgone
Publish date: Thu, 15 Feb 2018, 11:29 AM
ckpsarawakgone
0 1
Following Message
15 February 2018 - Protasco Bhd road maintenance business once again announced a "moderately sour news", where it saw a huge drop of expiring Sarawak Federal Road maintenance contract from 100% to mere 30% contract ownership stake & profit sharing.
 
According to Hong Leong Research update, the contract although the road was "longer" but significantly "less attractive" and might not be able to cover the weak construction and property development sector. Hong Leong Research maintained "hold" position with TP of RM1.14 per shares.
 
The retail investors rarely read the details, where this news which announced at a day before the Chinese Lunar New Year spells "bad signals" with 70% discounted new contract, is a shock news to the market. This shall affect Protasco Bhd income from August 2018 onwards, at 70% discount at least from Sarawak road maintenance!
 
Which means Hong Leong Research being "generous" to maintain HOLD, which actually meant "NOT GOOD". Of cause, the strange "Melacca Securities" which has been covering since Protasco Bhd was traded at RM2.20, gave a bullish rating TP from RM1.20 to RM1.25. Hopefully the Melaka people will read.
 
Investors might want to look forward to next 2 quarters report before jumping to conclusion.
 
 
 
BlueChip Report Analysis

 

Refers: http://www.bursamalaysia.com/market/listed-companies/company-announcements/5693789

 

OTHERS CONCESSION AGREEMENT FOR MAINTENANCE OF FEDERAL ROADS IN THE STATE OF SARAWAK, MALAYSIA

PROTASCO BERHAD

 

Type Announcement
Subject OTHERS
Description 
CONCESSION AGREEMENT FOR MAINTENANCE OF FEDERAL ROADS IN THE STATE OF SARAWAK, MALAYSIA

Protasco Berhad (“Protasco”) is pleased to announce that, DAL HCM Sdn. Bhd. (“DAL HCM”) has today entered into a Concession Agreement with  the Government of Malaysia (“Government”),  for the maintenance of the Federal Roads in the state of Sarawak, Malaysia ("New Concession").

HCM Engineering Sdn. Bhd. (“HCM”), a wholly owned subsidiary of Protasco, was awarded a 15-year concession by the Government of Malaysia on 14 July 2003 to maintain approximately 373 kilometers of Federal Roads in Sibu, Bintulu and Mukah divisions in the state of Sarawak, Malaysia. The 15 years concession shall expire in August 2018.   

DAL HCM, which has a paid up capital of RM4,501,100, is 30% owned by HCM and 70% owned by D.A.L. Keluarga Realty Sdn. Bhd.   

Under the New Concession,  DAL HCM is granted the right to undertake routine maintenance, periodic maintenance, emergency works and all other activities incidental to the performance of the said works on part of the Federal Roads consisting approximately 751 kilometers of roads or any other length as determined by the Government from time to time within the state of Sarawak, for a period of 10 years commencing from 1 September 2018.  

The New Concession is expected to contribute positively to the future earnings of Protasco Group.  



 

Announcement Info

Company Name PROTASCO BERHAD
Stock Name  PRTASCO
Date Announced 14 Feb 2018
Category General Announcement for PLC
Reference Number GA1-14022018-00066

 

News

  • New concession sealed in Sarawak. Protasco announced that its 30% associate, DAL-HCM has entered into a concession agreement with the Federal Government for the maintenance of Federal Roads in Sarawak. Under the concession agreement, DAL-HCM is granted the right to undertake both routine and periodic maintenances as well as emergency works on 751km of Federal Roads in Sarawak for a period of 10 years commencing 1 Sept 2018.

Comments

  • Existing concession to expire soon. To recap, Protasco currently has a 15-year concession (100% stake) to maintain Federal Roads in Sarawak which will soon expire in Aug 2018. As such, this new concession (via DAL-HCM) should help assuage concerns on its current concession expiry.
  • Lower stake but longer length. While Protasco’s stake in this new concession has been reduced from 100% to 30% (i.e. from a wholly owned subsidiary to an associate), we feel that this will be somewhat compensated by the longer length of roads to be maintained. This new concession stipulates 751km of roads to be maintained, which is 2x the length of its existing concession’s 373km. 

Risks

  • Low orderbook replenishment.

Forecasts

  • Unchanged as we have already assumed that its existing concession would be extended.

Rating

  • Maintain HOLD, TP: RM1.14 
  • While we like Protasco for its defensive qualities of its road maintenance business, we feel that this may be insufficient to significantly cushion the downside from its cyclical construction and property segments.

Valuation

  • Our TP of RM1.14 is based on 12x FY18 earnings.

Source: Hong Leong Investment Bank Research - 15 Feb 2018

Discussions
Be the first to like this. Showing 2 of 2 comments

ckpsarawakgone

Interesting facts finding wrap up protasco problem:
https://klse.i3investor.com/blogs/chongplugprotasco/147459.jsp

2018-02-15 11:47

ckpsarawakgone

No wonder more and more project but share price drop lower and lower. Protasco has a demon inside eating the company alive!

2018-02-15 11:47

Post a Comment