Bina Puri Holdings - 9M12 results below expectations

Period    3Q12/9M12

Actual vs.  Expectations  The 9M12 net profit of RM4.4m came in below our estimates, making up 44% of our FY12E full year net profit forecast.

Dividends   No dividend was declared during the quarter. 

Key Result Highlights  YoY, the 9M12 revenue of RM953m increased 7.0% on the back of higher property sales at RM30m (>100%). However, the net profit of RM4.4m fell by 42%, bogged down by higher operating costs for the LRT extension and KLIA2 projects. The management is in the midst of submitting VOs for the KLIA2 project due to the changes in the design. 

 QoQ, the overall revenue of RM367m increased by 29% as its construction revenue improved by 24% due mainly to the progress on its LRT extension project. To recap, the development order was granted in late 2Q12. However, due to the delays in the past of the project, its net profit came down to RM132k (-94%) as the revenue has yet to recover the project’s initial cost of the project. 

 During the quarter, Bina Puri recorded a higher effective tax rate of 59.1% (+30.9ppt) from 28.2% previously, which further compressed its final net profit number.

Outlook   Moving forward, Bina Puri is focusing in executing the work in hand of RM2.2b as the management opined that the certainty of order book replenishment is low at this juncture.

Change to Forecasts

 We have reduced our FY12-13E by 29% and 18% to RM5.4m and RM11.1m respectively as we have trimmed down our margin assumptions for these two years.

Rating  Downgrade to UNDERPERFORM

 We are downgrading Bina Puri to an UNDERPERFORM from a MARKET PERFORM previously as the slow progress of the LRT project will further compress its margin. In addition, there is a lack of fresh impetus for the construction sector at this juncture. Our new TP below implies a significant downside for the current share price.

Valuation    We have cut our Target Price significantly from RM0.80 to RM0.48 pegged to an unchanged 5.0x PER on our revised much lower FY13E EPS of 9.7 sen.

Risks   Escalating building material prices.

Source: Kenanga