PGHB’s MYR13.8m 1QFY14  net  earnings  (+10.4%  y-o-y,  +9.0%  q-o-q) were largely in line with our and streets’ estimates. The trading division was  affected  by  slower project  execution  but  manufacturing  continues to  show  commendable  earnings.  A  1.2  sen  interim  dividend  was declared. We maintain our positive view on the outlook of the Company, retaining out BUY recommendation with FV MYR1.43 unchanged. 

- Earnings in line. PGHB’s MYR13.8m reported net profit (+10.4% y-o-y, +9.0%  q-o-q)  was  largely  in  line  with  our  estimates.  Revenue  from  its trading division (-12% y-o-y) was affected by slower project execution in the  oil  &  gas  (O&G)  sector,  which  we  believe  was  due  to  pre-General Election uncertainties. Additionally, increased operating expenses and a product  mix  change  also  narrowed  down  this segment’s  profit  margins. Nonetheless, PGHB’s manufacturing division continues to shine brightly, reporting  revenue  of  MYR82.5m  (+50%  y-o-y)  and  higher  segmental profit  of  MYR12.2m  (+160%  y-o-y).  This  was  mainly  attributed  to  an increase  in  output  and  improved  product  mix.  All-in-all,  its  overall performance  was  in  line  with  what  we  expected,  with  all  its  business arms contributing positively and the Group charting a positive growth. 

- Positive  outlook  remain.  We  still  remain  positive  on  PGHB  for  its potential growth, particularly from the manufacturing division. Sales in its trading  division  may  pick  up  eventually  in  the  near-term,  as  we  are  still bullish  on  the  local  O&G  sector,  which  is  being  driven  by  Petronas’ aggressive  capex  spend.  Furthermore,  the  Group  is  also  expanding overseas aggressively to diversify its income stream. 

- Dividend payout maintained. PGHB is maintaining its dividend payout by  declaring  a  1.2  sen  single  tier  interim  dividend  this  quarter.  Our assumptions  are  based  on  a  conservative  30%  dividend  payout  in FY14F,  which could  translate to  a  dividend  yield  of  3.0%  (based  on  the last  closing  price).  We  deem  the  yield  as  still  attractive  for  a  growing company.   

- BUY,  FV  unchanged.  We continue to like  PGHB for  its solid  business foundation  and  bright  prospects,  hence  maintaining  our  BUY recommendation with FV MYR1.43 pegged to 13x FY14F P/E.

Source: RHB