Review

• Excluding an impairment loss of RM1.7mn, Pesona’s FY17 core profit of RM20.9mn came in below expectations, accounting for 85.8% and 85.7% of ours and consensus’ full-year forecasts. The variance was mainly due to weaker-than-expected contribution from the construction division.

• A final dividend of 1 sen/share was proposed (FY16: 2sen/share).

• YoY, FY17 net profit improved by 4.2% to RM20.9mn, as the revenue was 39.6% higher at RM548.8mn. The growth in the bottom line was outpaced by the growth in top line as the construction operation margin dived 3.5%-pts to 4.8%. The margin was impacted by higher depreciation of construction equipment.

• QoQ, 4QFY17 net profit plunged 23.5% to RM3.8mn. The fall was in tandem with a 23.0% decline in the quarterly revenue to RM90.2mn. The construction operation margin dived from 7.2% a quarter ago to 2.7% for the same reason stated above.

Impact

• Following the weaker-than-expected results, we revise margins for various construction projects and cut FY18 and FY19 earnings forecasts by 14.2% and 4.8% respectively. Forecasts for FY20 are introduced with a projected marginally drop of 1.2% in net earnings to RM31.1mn.

Outlook

• Persona’s outstanding order book stood at RM1.6bn as of January 2018, which is sufficient to last the group for the next 2 years.

Valuation

• Maintain our BUY call with a lower target price of RM0.46, based on sumof-parts valuation.

Source: TA Research - 28 Feb 2018