Bina Puri Holdings - Proposes private placement

News    Bina Puri (“BPURI”) announced that it is undertaking a private placement of up to 10% of its new shares. The proceeds would be used mainly for its working capital and repayment of borrowings.

Comments   Based on the last closing price of RM0.76, the proposed placement will raise up to RM10m. A sum of RM5m has been earmarked for its working capital and the remainder would be utilised to pare down its borrowings. 

 We understand that some of its projects are experiencing delays due to the late issuance of Development Order (D.O.) and variations in the orders. At present, the significant projects in its order book are the construction of KLIA2 and the LRT Extension project. After the proposed placement, the share capital will rise to RM136.9m from RM124.4m and there will be a net dilution impact on its FY13E EPS from 9.7 sen to 8.1 sen.

 We believe that the placement exercise is inevitable due to the worsening negative operating cash flow of the company from RM32m (9M11) to RM153m (9M12). To recap, the construction of its LRT extension project had been delayed for almost 12 months and it just resumed back recently after the D.O. was finally obtained from the authority. The delay has negatively impacted the company’s cash position due to the mismatch between the project’s revenue recognition and its recurring fixed cost. On top of that, the changes in design for the KLIA2 project may further eat into its cash position lower going forward.

 BPURI has also recently aborted its M9-Superhighway project in Pakistan. This was due to the breach of Condition Precedents (“CPs”) by the National Highway Authority of Pakistan. We believe that the project's feasibility is limited due to its expensive cost of operation and the high financing cost environment (c.11%) in Pakistan.

Outlook   Moving forward, with the completion of KLIA2 in June 2013, this should free up its cash flow and allow the group to bid for other projects.  

Forecast   No changes to our FY12E and FY13E earnings.

Rating  Maintain UNDERPERFORM

 

Valuation    However, we have reduced our Target Price from RM0.48 to RM0.40 based on 5x PER of its FY13 earnings after imputing in the potential dilution above from its share placement exercise. 

Risks   Delays in construction projects.

 Escalation in its raw materials and labour costs.

Source: Kenanga