Review

• Pesona’s 9M17 net profit of RM17.1mn came in below expectations, accounting for 56.2% and 53.8% of ours and consensus’ full-year forecasts. The variance was mainly due to lower-than-expected construction revenue.

• YoY, 9M17 net profit of RM17.1mn was only 9.0% higher despite the revenue grew at a much higher rate of 59.7% to RM458.6mn. The gross margin was relative stable in 9M16 (10.1%) and 9M17 (9.9%). However, the 9M17 PBT margin declined by 2.4%-pts YoY due to reduction in interest income.

• QoQ, 3QFY17 net profit dropped 17.7% to RM5.0mn as revenue declined 35.3% to RM117.1mn. The lower revenue was due to completion and delivery of 2 building projects during the reporting quarter.

Impact

• YTD, the group has yet to secure any new construction contract. We cut our FY17 order book replenishment assumptions from RM300mn to nil. Following the weaker-than-expected results and revision in FY17 order book replenishment assumptions, we cut FY17/FY18/FY19 earnings forecasts by 19.9%/12.9%/ 20.8% respectively, and trim dividend payout assumptions for FY17 to FY19 from 2.5sen/share to 1.5sen/share.

Outlook

• Persona’s outstanding order book stood at RM1.6bn, which is sufficient to last the group for the next 2 to 3 years.

Valuation

• Maintain our BUY call with a lower target price of RM0.55, based on sumof-parts valuation.

Source: TA Research - 27 Nov 2017