RHB Investment Research Reports

BM Greentech - Outstanding Earnings Already in the Price

rhbinvest
Publish date: Wed, 29 May 2024, 11:08 AM
rhbinvest
0 3,841
An official blog in I3investor to publish research reports provided by RHB Research team.

All materials published here are prepared by RHB Investment Bank Bhd. For latest offers on RHB Invest trading products and news, please refer to: http://www.rhbinvest.com

RHB Investment Bank Bhd
Level 3A, Tower One, RHB Centre
Jalan Tun Razak
Kuala Lumpur
Malaysia

Tel : +(60) 3 9280 8888
Fax : +(60) 3 9200 2216
  • NEUTRAL, new MYR1.21 TP from MYR0.97, 4% downside. FY24 (Mar) earnings exceeded expectations on BM Greentech’s outperformance across all three segments. However, as the share price has rallied 40% YTD, we believe its valuation is now fair, trading at 16x, in line with its historical mean.
  • FY24 core profit of MYR36.3m (+85% YoY) exceeded expectations, at 118% of our and 125% of consensus’ FY24 projections. The deviation was from higher-than-expected PBT margins across all segments. BMGREEN declared an FY24 final DPS of MY0.0225, above our forecast of MYR0.02. This translates to an FY24 core payout ratio of 30% (1.8% yield).
  • Bio-energy segment PBT doubled YoY, bringing FY24 PBT to MYR33.4m (+146.5% YoY) despite lower YoY revenue growth of 11% in FY24 – mainly due to normalisation of steel costs (-10% YoY) on top of stronger project delivery with higher profit margins. As a result, FY24 PBT margin rose to 10.3% (FY23: 4.6%), above our 8.5% estimate. We expect the non-palm oil sector to lead the segment’s 3-5% YoY revenue growth for FY25-26F, as we note that most palm oil players are focusing on replanting and rehabilitation of their estates. We raise FY25-26F PBT margins to 11-12% (from 10-11%).
  • Water treatment PBT saw a 3.6% uptick to MYR6.1m in FY24, in line with a 5% rise in revenue. The segment’s FY24 PBT margin was rather stable at 12.1% (FY23: 12.3%), above our 11% estimate. Despite having the highest margins, the segment only made up 14% of FY24 PBT. Coming into FY25, we believe the palm oil sector will still be the main contributor of our +4% segment revenue growth forecast. We raise FY25-26F PBT margins to 11% from 4% previously.
  • Solar energy PBT was MYR8.4m in FY24 (FY23: MYR1.4m), while revenue jumped 72% YoY due to higher project delivery in the residential segment. As a result, FY24 PBT margin grew to 13.0% from 3.8% in FY23 on the back of normalisation of solar panel prices since end-CY22 (above our 11% estimate). As a result, the segment’s FY24 PBT share rose to 17% (FY23: 7%). Given the strong interest in green energy, we anticipate 15% FY25F revenue growth for the segment, but revise FY25-26F PBT margins to 11% from 4%.
  • We revise up FY25-26F earnings estimates by 21-23% after imputing higher PBT margins for both the bio-energy and water treatment segments, while revising up both finance cost and income assumptions.
  • Valuation. Our new MYR1.21 TP is based on a rolled-forward 16x FY25F P/E. Our TP includes a 4% ESG discount. Its current valuation is fair at 16x 2025F P/E, in line with its 16x historical mean.

Source: RHB Securities Research - 29 May 2024

Related Stocks
Discussions
Be the first to like this. Showing 0 of 0 comments

Post a Comment