Period 1Q12
Actual vs. Expectations
1Q12 net profit of RM78.3m was broadly within expectations.
This makes up 22% of ours as well as the street’s FY12 full-year estimates of RM349.5m
and RM356.8m respectively.
Dividends No dividend was declared as expected.
Key Results Highlights
1Q12 net profit surged 69% QoQ, led mainly by new projects
such as Tapis EOR (50% completion for Q topside from 39%, and 30% for R
topside) and Telok Gas Project (40% from 19%). This led to the EBIT for the
Engineering and Construction (E&C) segment almost doubling to RM65.8m from
RM33.2m. However, the Marine Conversion & Repair (MCR) unit reported a 36%
decline in EBT to 10.3m on margin compression due to poor market condition
although the number of vessels being repaired was maintained at 20.
YoY, 1Q12 net profit dipped 39% from RM128.6m as EPCIC
Turkmenistan Block 1 project has been completed. Hence, the associate income declined
to RM1.1m from
RM23.6m previously. Meanwhile, E&C reported EBIT which contracted
33% but MCR turned profitable (RM10.3m) from a loss making (-RM14.1m) position
previously.
Orderbook declined to RM2.36b as at Mar 2012 from RM3.09b
three months ago.
Outlook Lacking of catalyst to boost earnings in the
shortterm, as its project execution and replenishment are prone to delays. The
stock’s valuation is also susceptible to a de-rating after the listing of Sapura
Kencana Petroleum.
Change to Forecasts No
changes in our FY12-FY14 estimates.
Rating MAINTAIN UNDERPERFORM
Valuation We are revising our fair value up to RM4.65
from RM4.26 previously as we roll forward our valuation basis to FY13. However,
we have revised our target PER lower to 18.0x (from 19.5x) as we believe the
stock will be de-rated once Sapura Kencana Petroleum is listed given the lack
of upside factors for the stock. The premium against the sector’s average PER
of 15.0x is due to its Petronas patronage status which guarantees it a certain
degree of contract replenishment.
Risks Risks to our call are higher-than-expected
project wins and acceleration in project executions.
Source: Kenanga
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