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Bina Puri Holdings (Kenanga Research) hold; target price RM0.97

Bina Puri Holdings
1Q10 results slightly below expectations

• 1Q10 net profit of RM1.9m net profit accounts for 20% and 21% of our forecast and consensus. The net profit doubled up on the back of higher construction revenu e as more progressive works has been completed this year especially from overseas projects, ie: Thailand. Other segment like property and polyol are still in the red. However, the quarry  division has turn to profitable but margin is still low at 2.7% vis -à-vis 5.0% last year.

• YoY, 121% higher in revenue supported by construction division. Due to larger size of projects secured during late FY08 to early FY09, the construction remains the main  contributor to the topline which grew 154% on the back of higher revenue recognised during the quarter. Its property division still underperform with losses of RM0.2m compared to RM0.6m profit last year driven by the sale of Taman Malawa Apartment Phase 2.

• QoQ, net profit marginally higher 1.6%. Despite of 19% higher in revenue, the net profit grew marginally by 1.6% due to higher building material cost and higher finance cost. The construction margin for the quarter is only at 0.9% compared to 2.2% in the preceding quarter. On the positive note, its quarry division has shown some improvement due to increased civil works.

• Order book at RM2b to last for the next 3 years.. The ongoing projects like Eastern Dispersal Link Highway and its overseas project are currently progressing within schedule. The KL-Kuala Selangor H ighway (KLS) which expected to start operation in 1Q11 will provide some steady cashflow to Bina Puri, going forward. In the near term, we expect the LCCT project award for the structure package is in the offing while Bina Puri is mulled to win the project together with its JV partner, UEM.

• Maintain HOLD with TP of RM0.97 based on 10x PE FY10. No change to our forecast as the results is considered inline with high construction revenue expected to be recognised in subsequent quarters. Our HOLD recommendation is mainly due to its share price valuation while we are cautious on the low profit margin for its construction division and the risk exposure in expanding its business into Middle East. On the local front, the positive news flow on contract awarding should lure the share price on the upward bias .

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