Review

• Ibraco’s FY18 net profit of RM30.1mn came in above expectations, accounting for at 132% and 149% of ours and consensus’ full year forecasts respectively. The variance was largely due to higher-than-expected progress billing and margin.

• Ibraco’s FY18 net profit more than doubled to RM30.1mn, on the back of solid revenue growth of 89% YoY. We attribute the stronger results to: 1) higher inventory sale, 2) stronger progress billing from property and construction division, and 3) better margin (EBIT margin +2.2pts YoY to 17.2%) due to change in product mix.

• Sequentially, the group’s 4Q18 revenue and net profit grew 14% and 64% to RM83.9mn and RM14.1mn respectively as construction progress of its ongoing projects and Mukah Airport accelerated to a more advance stage. We understand that the airport was 27% completed as at 31 Dec 2018, which is ahead of scheduled by 5%.

Impact

• Maintain earnings forecasts.

Outlook

• Ibraco recorded RM39mn new sales in 4Q18, bringing FY18 sales to RM230mn. This came in within our FY18 sales assumptions and management’s sales target of RM230mn.

• For FY19, management has set a sales target of RM230mn, underpinned by new launches within Northbank, Kuching. Future earnings is expected to be anchored by unbilled sales of RM269.3mn and outstanding construction order book of RM205.1mn.

Valuation

• We place our target price and recommendation under review pending more guidance from management in an analyst briefing to be held later today.

Source: TA Research - 25 Feb 2019