Author: sectoranalyst | Publish date: Mon, 28 Aug 2017, 08:57 AM
Results Review
While Pesona’s 1H17 net profit of RM12.1mn made up 36.6% and 38.1% of our and street’s estimates, we deem the results to be within expectations as we expect a stronger performance in 2H17 given i) 1H17 was affected by holiday breaks during Chinese New Year and Hari Raya Aidilfitri; and ii) progress for majority of its projects accelerates.
No dividend was declared in the reporting quarter, versus 1sen/share declared in the corresponding period last year. The group has turned into a net debt position end of last year from a net cash position due to a significant increase in working capital requirement after securing exceptionally huge amount of new contracts worth RM1.8bn in 2016.
YoY, 1HFY17 net profit was merely 2.5% higher despite the revenue surged 85.0% to RM341.5mn as the operating margin dropped 3.9%pts to 5.2%. This was mainly due to higher depreciation charges of construction equipment as compared with the corresponding period last year.
QoQ, 2QFY17 net profit was marginally higher by 0.7% at RM6.1mn as revenue increased by 12.8% to RM181.mn. The 2QFY17 operating margin eased by 0.8%pts to 4.8% compared with the immediately preceding quarter.
Impact
No change to our FY17 to FY19 earnings forecasts.
Outlook
Its outstanding order book stood at RM1.7bn. This could last the group for the next 3 years.
Risks to earnings include potential worsening of labour supply issue and price of steel reinforcement bars remain elevated after the surge in steel bar price from about RM2,000/MT to approximately RM2,450 lately as these would negatively affect the construction margin and potentially delay the overall completions of projects.
Valuation
Maintain our BUY call with an unchanged target price of RM0.78, based on 14x CY18 EPS.
Source: TA Research - 28 Aug 2017
http://klse.i3investor.com/blogs/taresearch/131007.jsp
