Friday, 1 March 2013

Puncak Niaga - FY12 earnings lower on impairments

Period  4Q12/12M12

Actual vs. Expectations  The FY12 core net profit of RM260m came in below our expectations, accounting for 83% and 80% of our forecast and that of the consensus respectively. This was due to higher operating costs in its water business. There was a RM22m net impairment write-down in FY12 for its receivables (due from Selangor State Government) and long term payables for its concession.

Dividends   No dividend was declared during the quarter.

Key Result Highlights  The FY12 core net profit of RM260m was much better as compared to the last year loss of RM8m. The last year’s loss was mainly due to impact of its first-time adoption of the new accounting standard for concession assets, i.e. IC12: Service Concession Agreement. The revenue meanwhile increased by 44%. The positive growth was attributed to the higher revenues at its oil & gas as well as construction segments.

 YoY, the core net profit was higher by almost fourfold from RM9m to RM35m due to the contribution of its oil and gas division and from construction as there was more progress on site and a higher order book replenishment.

 QoQ, the revenue came down by 5% due to a lower contribution from its oil and gas division. Its core net profit was halved from the previous quarter to RM35m, due to the higher operating cost on its water business. The margin fell to 8% as compared to 27% in 3Q12.

Outlook  The election risk remains as the main risk for Puncak Niaga due to the uncertainties of the upcoming General Election. The recent offer for Puncak could have valued it RM2.43 per share.

Change to Forecasts  We have trimmed our FY13E estimates slightly by 7% as we factored in a higher cost.

Rating   Maintain OUTPERFORM
 Maintaining our OUTPERFORM rating due to uncertainties from the upcoming general election but we opine that Puncak is will be best suit for our Dark Horse strategy.

Valuation  We are maintaining our TP at RM2.85 (based on SOP).

Risks  Prolonged water consolidation process.

Source: Kenanga

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