Puncak Niaga Holdings: Mixed Bag

Puncak Niaga Holdings (Puncak)’s 9MFY12 net profit of RM225m was marginally ahead of our and consensus estimates. Although water distribution, O&G and construction divisions all recorded lower earnings q-o-q, the company’s bottomline was almost flat on lower corporate tax charges. That said, we believe the results are enough to cheer investors, especially since the equity market is currently short on investment ideas. We are not particularly worried about the potentially lower contribution from the O&G division, as it is seasonal. Thus, we are keeping our profit estimates and maintain our Trading BUY on Puncak, with our FV tagged at RM2.08. 

9MFY12 numbers ahead; deem in line. Puncak’s net profit of RM225m for 9MFY12 is slightly ahead of OSK/consensus estimates, but we deem the numbers in line as we expect lower profit moving into 4Q. The sharp increase in y-o-y turnaround was due to the timely recognition of higher water tariff compensation arising from the scheduled 25% water tariff hike, which should have been gazetted on 1 Jan 2012. Meanwhile, the group’s Oil & Gas (O&G) division continues to churn in profit, but profit before interest and tax (PBIT) of RM14.5m in 3Q was 58.1% lower q-o-q. We suspect this was due to the monsoon season coming in early and from recognition of lower margin job during the quarter. Also, its construction division posted a lower PBIT of only RM0.5m in 3Q, due to cost incurred to remedy the works of non-performing sub-contractors. Nonetheless, bottomline was almost flat q-o-q on lower corporate tax charges.

Weaker 4Q ahead? As the dispute between its water unit and the Selangor State Government rages on, the focus has turned to Puncak’s O&G business. Meanwhile, the newly acquired Global Offshore (M) SB (GOM) has secured a lucrative O&G pipe maintenance project worth more than RM500m, which is impressive, considering it is newly acquired. Nonetheless, we expect the income from GOM to be lower moving into 4Q in view of the monsoon season. Meanwhile, the margins from the group’s O&G projects are estimated to be in the mid-teens. That said, as its earnings are marginally ahead of our estimates, we are making no changes to our projections for now.

Maintain Trading BUY. We reckon the major improvements to the company’s bottomline were mainly attributed to compensation for the non-implementation of higher water tariffs and did not involve any physical cash inflow until the court delivers its judgement. Nonetheless, the improvement in P&L is indeed a sentiment booster. In addition, the group’s successful move into the lucrative O&G field on top of its rural water supply projects are also sufficient reasons for investors to cheer. Therefore, we are maintaining our Trading BUY recommendation, with the stock’s fair value kept at RM2.08. This implies a mere 3x forward FY12 EPS.

FYE Dec (RMm)	FY09	FY10	FY11	FY12f	FY13f
Revenue	1887.0	2120.1	2591.5	3292.9	3414.8
Net Profit	142.3	-72.3	9.3	285.8	294.5
% chg y-o-y	558.6	-150.8	112.9	n.m.	3.0
Consensus	-	-	-	265.4	288.6
EPS	34.6	-17.6	2.3	69.5	71.6
DPS	13.3	0.0	0.0	0.0	0.0
Dividend yield (%)	10.3	0.0	0.0	0.0	0.0
ROE (%)	10.0	-9.7	21.5	132.0	58.1
ROA (%)	1.7	-0.7	0.1	2.2	2.3
PER (x)	3.7	-7.3	56.9	1.9	1.8
BV/share	3.58	0.03	0.18	0.87	1.59
P/BV (x)	0.4	40.8	7.2	1.5	0.8
EV/EBITDA (x)	3.6	4.8	6.6	2.8	2.3

Results Table (RMm)

FYE Dec	3QFY12	2QFY12	Q-o-Q chg	YTD FY12	YTD FY11	Y-o-Y chg	Comments
Turnover	1030.8	988.3	4.3%	2763.0	1660.3	66.4%	Up y-o-y due to timely recognition of higher water tariff and contribution from O&G division
EBIT	214.8	245.6	-12.5%	674.5	266.2	153.4%
Net interest expense	-164.4	-155.7	5.6%	-472.9	-461.2	2.5%
Associates	-0.1	0.0	n.m.	-0.2	7.8	n.m.
Exceptional Items	0.0	0.0	n.m.	0.0	16.5	n.m.
PBT	93.8	135.8	-30.9%	335.5	-71.8	-567.1%
Tax	-15.8	-51.7	-69.5%	-98.0	10.8	-1010.7%
MI	0.2	-5.7	-103.5%	-12.5	61.7	-120.3%
Net Profit	78.2	78.4	-0.3%	225.0	0.6	38107.3%	We deemed the results in line
Core Net Profit	78.2	78.4	-0.3%	225.0	-15.9	1514.7%
Core EPS (sen)	19.0	19.1		54.7	-3.9
Gross DPS (sen)	0.0	0.0		0.0	0.0		No dividend was declared for the quarter under review
EBIT margin	20.8%	24.8%		24.4%	16.0%
NTA/share (RM)	0.70	0.51		0.70	-1.26

EARNINGS FORECAST

FYE Dec (RMm)	FY09	FY10	FY11	FY12f	FY13f
Turnover	1887.0	2120.1	2591.5	3292.9	3414.8
EBITDA	1170.6	1009.9	720.2	1325.5	1331.8
PBT	312.6	-108.3	-75.2	586.8	602.5
Net Profit	142.3	-72.3	9.3	285.8	294.5
EPS	34.6	-17.6	2.3	69.5	71.6
DPS	13.3	0.0	0.0	0.0	0.0
Margin
EBITDA (%)	62.0	47.6	27.8	40.3	39.0
PBT (%)	16.6	-5.1	-2.9	17.8	17.6
Net Profit (%)	7.5	-3.4	0.4	8.7	8.6
ROE (%)	10.0	-9.7	21.5	132.0	58.1
ROA (%)	1.7	-0.7	0.1	2.2	2.3
Balance Sheet
Fixed Assets	6759.5	9586.6	11160.4	11223.5	11281.7
Current Assets	1999.6	2400.4	1740.0	1853.3	1700.2
Total Assets	8759.1	11987.0	12900.4	13076.8	12981.9
Current Liabilities	1562.6	2839.8	2389.0	2608.3	2540.4
Net Current Assets	437.0	-439.5	-649.0	-755.0	-840.2
LT Liabilities	5457.8	9118.3	10527.5	10089.1	9655.9
Shareholders Funds	1473.8	13.0	73.6	359.5	654.0
Net Gearing (%)	245.9	32858.1	5764.0	883.9	382.4

 Source: OSK