¨      Core 1QFY15 profit of MYR49m (+12% YoY) in line with our but below consensus numbers (at 20%/17% of our/consensus full-year estimates respectively). Its Malaysian operations were the top-line performers (+8% revenue growth) due to: i) upstream contributions from its farmed-in D35/D21/J4 production-sharing contract (PSC) that was signed in Sep 2014, ii) engineering activities for Phase 1C at its Pengerang Independent Deepwater Terminal (PIDT), and iii) various local fabrication projects. International operations (-17% revenue growth), however, were hampered by low activities in engineering, construction and plant maintenance works in Singapore and fabrication in New Zealand. These offset the good revenue traction in its Jubail Supply Base logistics services and specialist products and services. Overall, net margins improved to 9% (from 8% YoY) due to higher-margin upstream activities.  

¨      Business updates. Phase 1B is now being commissioned for start-up while Phase 1C is on schedule for mechanical completion by Dec 2014. Phase 2, which involves a regasification terminal and storage tanks, will be developed at a total project cost of MYR2.7bn – with its operational date in line with our end-2017 estimate. All its key upstream assets are up and running following the inclusion of the PSC.

¨      Maintaining our forecast. We believe that the aforementioned low international activities are likely due to slow work schedules during the quarter, and expect these to pick up in subsequent quarters. We also expect incremental contributions from the commencement of the further phases of its PIDT projects. Typically, the group charts better 2H profits.