Bina Puri Holdings Bhd (March 3, 43 sen)

Maintain hold call with a revised target price (TP) of 49 sen: Bina Puri Holdings Bhd’s financial year ended Dec 31, 2016 (FY16) core profit of RM12.9 million came in within expectation, accounting for 102.5% of our full-year forecast. Year-on-year, its FY16 core profit surged 42.1% despite the top line was 17.8% lower at RM1.05 billion.

The improved results were due mainly to favourable job mix with lower minority interest. Better performance of the power division arising from higher generating capacity was offset by weaker performance of its construction, property, building materials and polyol divisions.

Quarter-on-quarter, its core profit jumped 183.7% to RM6.1 million, mainly boosted by stronger performance of its construction, property and power divisions, as well as higher other operating income.

Adjustments to our earnings forecasts are made to reflect actual RM561 million of construction contracts secured in FY16 versus our assumptions of RM1 billion, and actual FY16 property sales of RM190 million versus our assumptions of RM100 million. All in, Bina Puri’s FY17 earnings forecast is reduced by 1.7% but its earnings estimate for FY18 is raised by 10.9%.

Currently the group has an outstanding order book of RM1.6 billion, translating into 1.9 times FY16 construction revenue. This would provide earnings visibility to the group for the next three years. Its property division has a healthy unbilled sales of RM195 million after recording property sales of RM190 million in FY16, versus about RM100 million a year earlier.

In view of the encouraging property sales, we raise the TP to earnings multiple for Bina Puri from seven times to eight times. — TA Securities Research, March 1

This article first appeared in The Edge Financial Daily, on March 6, 2017.

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