News Benalec announced that it had been awarded a 3+2
years Contract of Affreightment for bulk coal from TNB Fuel Sdn Bhd, a
wholly-owned subsidiary of Tenaga Nasional Berhad (TNB).
The contract is worth RM67.5m and the contribution to
Benalec’s revenue will be about RM22.7m per annum. The contract will commence
from 1st May 2012 to 30th April 2015.
Comments We are
positive with the new contract secured as it will mean more stable earnings for
Benalec going forward. We also understand that Benalec is eyeing for more
contracts from TNB following this contract award.
We expect Benalec to
reap 40% and 20% gross and pre-tax profit margins respectively from this contract.
The contract award
above is deemed to be in line with our assumption of new contract replenishments
for its vessel and chartering business.
Outlook Management has indicated that they are experiencing
some delays in wrapping up the recent land sale due to timing issues. The delay
will potentially push the earnings recognition to FY13.
It is however likely
that the transaction will be finalised in 3 to 6 months time from now.
Forecast We
have trimmed our FY12 earnings lower by 27% ahead of its 3Q12 results
announcement tomorrow as we have factored in the fact that earnings from the
land sale will now be booked in only in FY13 (from the earlier expected
FY12).
Rating MAINTAIN OUTPERFORM
There is still a huge
potential upside for the stock to our Target Price.
Valuation We
have reduced our TP to RM2.37 from RM2.70 previously due to delay in
recognising the recent Melaka land sale. Our Target Price is derived from SOP
valuation.
Risks Further delays in land sales (reclamation
land)
Source: Kenanga
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