• We maintain Hold on Formis Resources Bhd (FRB), with a lower
fair value of RM0.83/share (vs. RM0.90/share previously) , based on a downward
revised FY12F core EPS of 7.5 sen on a PE of 11x – three notches below its
3-year average rolling forward PE of 14x.
• FRB posted a net profit of RM8.2mil (+42% YoY), which represented
only 52% of our previous net profit forecast of RM15.9mil. However, excluding a
one-off charge of RM4.5mil booked earlier in 2QFY12, the 9MFY12 bottomline would
have made up 80% of our earlier forecast and hence, within expectations. No
dividend was declared.
• Given the off-charge for a foreseeable loss in a project,
we have cut FY12F net profit to RM9.5mil (-68% vs. our earlier forecast of
RM15.9mil). Our FY13F and FY14F earnings are cut by 22% and 17%, respectively,
to factor in a potentially more challenging operating environment ahead.
• For 3QFY12, FRB posted a net profit of RM0.6mil (+253% QoQ;
-63% YoY) on the back of a lower revenue, by -26% QoQ and -15% YoY.
• 3QFY12’s EBIT margin fell 0.9 of a percentage point (ppt)
to 4.4% from 5.3% in the previous quarter, but was up 1.7ppts from 2.7% a year
earlier. These numbers signify that FRB remains sound operationally, but are
still subject to significant earnings
volatility.
• For the 9MFY12 up till 31 December, FRB had secured new jobs
amounting to about RM206mil vs. RM196mil in the previous corresponding period.
As at 31 December 2011, its outstanding order book amounted to RM118mil.
• We understand that in the pipeline are jobs valued to the tune
of over RM1.2bil, and the company has tendered for RM700mil-RM800mil worth of
contracts.
• We are maintaining our new job assumption to the tune of between
RM300mil and RM350mil annually, given the strong job pipeline amid increasing
pressure on the public and private sector to chase after technological
efficiency amid an increasingly tough economic climate.
• We understand that FRB is waiting for the government’s decision
on the tenders for the maintenance job for the first phase of the government’s
e-court project as well as the second phase contract. It has been reported that
the second phase of the e-court project could be worth between RM150mil and
RM250mil.
Source: Amesecurities
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