Period 2Q12/1H12
Actual vs.
Expectations
Within ours
and the consensus expectations.
The 1H12
net profit of RM33m made up 45% and 46% of ours and the consensus’ forecasts of
RM74.2m and RM72.8m respectively.
Dividends No
dividend was declared during the quarter.
Key Result Highlights
1H12 net
profit increased by 4% on the back of a 15% jump in revenue. The lower growth
in net profit was mainly due to the poor performance of its shipyard division
due to lower contracts for the division. YTD, the outstanding order book for
the shipyard division has dropped by 53%.
QoQ, the
net profit increased only by 5% despite the 49% jump in revenue. This was
mainly due to the margin compression (pre-tax) for its construction and shipyard
divisions from 2% to 1% and 27% to 15% respectively. Nonetheless, its crane
division remained stable with a 10% pre-tax margin and a 78% jump in
profits.
YoY, the
net profit grew by 23% in tandem with its revenue growth of 22%. This is in line
with higher recognition of its ongoing order book especially for its crane
division (+6%).
Outlook We
opine that the positive news flow on APH could lift up the sentiment on the
stock and provide a better clarity on the risk of possible future writeoffs. At
this juncture, we see the current situation as a trading opportunity for
investors.
Apart from
the APH issue, Muhibbah’s order book stood at a good RM2.6b, which will last it
for the next 2 years. Its crane business remains lucrative and we believe that
this will further support the group’s earnings going forward.
Change to Forecasts
No changes
in our FY12-13E forecasts.
Rating Upgrade
to OUTPEFORM
We have
upgraded our recommendation on Muhibbah to an OUTPERFORM from a MARKET PERFORM
as we believe that the market has already priced in APH’s risk at its current
share price level, which offers a 50% capital upside to our TP.
Valuation We
have lowered our TP to RM1.46 based on SOP (previously RM1.67) as we factored
in higher possible write-offs for APH to RM240m from RM111m.
Risks Prolonged
receivership status for APH.
Source: Kenanga
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