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Property development and O&G to drive Enra’s profit

Enra Group Bhd (July 14, RM3.10)

Initiate hold with a fair value of RM2.45: Incorporated in Malaysia in 1992 under the name of Orlando Holdings Bhd, the company was listed on the Second Board of Bursa Malaysia on Dec 28, 1992. In 2000, the company changed its name to Formis (M) Bhd before being transferred to the Main Board of Bursa Malaysia on March 30, 2000. It then assumed the name of Perduren (M) Bhd on Sept 19, 2006.

The company was taken over by Datuk Kamaluddin Abdullah and Datuk Mazlin Md Junid in February 2015, and its name was changed to Enra Group Bhd. Post-acquisition, the company has realigned its business direction with its current focus on property development and the oil and gas (O&G) sector. It appointed a new management team and board of directors in June 2015.

With the realignment of its business strategy, it started to divest its non-core businesses, and in July 2015, completed the sales of several non-core businesses, namely investment holding, hotel management and car-park operations. In May, it announced the disposal of its remaining investment properties.

In May 2015, Enra ventured into its maiden property development project in London, the UK. This was followed by its foray into the O&G sector in September 2015 through Enra Kimia Sdn Bhd.

We expect Enra to sustain its growth moving forward driven by a highly capable management team.

We project Enra’s core net profit to grow by 22% and 55% year-on-year in financial year 2018 (FY18) and FY19 respectively, driven by: i) ongoing property development projects in Shamelin Star, Cheras, Kuala Lumpur, and 93, Titchfield Street, London; ii) steady income from its existing O&G business; and iii) new contributions from its new O&G single-point mooring system contract it recently won in Myanmar.

We expect the property development and O&G divisions to remain the key drivers of Enra’s earnings in the next few years.

For FY18, we forecast property development to contribute 57% of revenue and 63% of overall pre-tax profit, with O&G making up 43% of revenue and 37% of pre-tax profit.

We also expect Enra to remain flexible in its structure to continue exploring opportunities in other business segments, highlighted by its tie up with Emrail on rail-related contracts. — AmInvestment Bank, July 14

This article first appeared in The Edge Financial Daily, on July 17, 2017.

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