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9M10 below expectations
• 9M10 net profit of RM 204m was below expectations being 60 % of our forecast of RM340m and 67% consensus of RM301m . Surprisingly weak, 3Q10 Expressways pre profit of RM7m compared to RM15.8m in 2Q10 due to high amortisation while fell volumes fell were the main cause of the lower net profit while sharply higher operating margins of 10.4% compared with 7.8% in 9M09. 9M10 construction margin improved to 4.0% from 1.5% in 9M09.
• YoY, 9M10 net profit was 36 % higher on the back of better operating margin of 10.4% v 7.8% in 9M09. The contribution is largely due to higher pretax profit contribution from construction which rose 139% while water concession grew 31% in the same period.
• QoQ , 3Q10 net profit was 7.3% higher on the back of higher operating margin of 12.8% and lower tax rate of 16.8%. All divisions except toll roads registered higher pretax profit contribution. Expressways pretax profit was 56% lower to RM7.0m as amortisation ate into profitability while traffic volumes were lower.
• YoY, 3Q10 net profit was 158% higher. The operating margin was 4.5% higher as construction division pretax margin were up sharply with contribution of RM18.7m compared to RM6.1m in 3Q09. Property division registered 57% higher petax profit on recognition of higher margin and unit price.
• Another interim dividend of 6 sen. This meets our forecast of 12sen per share for FY10.
• Net cash of RM84m. This strong cash hoard enables flexibility in construction material inventory management and also ability to raise funding to undertake large contracts.
• Maintain FY10 and FY11 net profit forecast as 4Q is typically a strong quarter while margins appear to continue to improve.
• Proposed MRT project is ambitious but we are doubtful the government will have the funding for a RM36b project which will have low financial IRR of less than 5% as this is a social economic project.
• Maintain HOLD with revised target price of RM3.26 (previously RM2.90) rolling over to FY11 EPS of 20.4 sen and average sector PER of 16x. Upgrade catalysts is the award of mega projects earlier than expected.
9M10 below expectations
• 9M10 net profit of RM 204m was below expectations being 60 % of our forecast of RM340m and 67% consensus of RM301m . Surprisingly weak, 3Q10 Expressways pre profit of RM7m compared to RM15.8m in 2Q10 due to high amortisation while fell volumes fell were the main cause of the lower net profit while sharply higher operating margins of 10.4% compared with 7.8% in 9M09. 9M10 construction margin improved to 4.0% from 1.5% in 9M09.
• YoY, 9M10 net profit was 36 % higher on the back of better operating margin of 10.4% v 7.8% in 9M09. The contribution is largely due to higher pretax profit contribution from construction which rose 139% while water concession grew 31% in the same period.
• QoQ , 3Q10 net profit was 7.3% higher on the back of higher operating margin of 12.8% and lower tax rate of 16.8%. All divisions except toll roads registered higher pretax profit contribution. Expressways pretax profit was 56% lower to RM7.0m as amortisation ate into profitability while traffic volumes were lower.
• YoY, 3Q10 net profit was 158% higher. The operating margin was 4.5% higher as construction division pretax margin were up sharply with contribution of RM18.7m compared to RM6.1m in 3Q09. Property division registered 57% higher petax profit on recognition of higher margin and unit price.
• Another interim dividend of 6 sen. This meets our forecast of 12sen per share for FY10.
• Net cash of RM84m. This strong cash hoard enables flexibility in construction material inventory management and also ability to raise funding to undertake large contracts.
• Maintain FY10 and FY11 net profit forecast as 4Q is typically a strong quarter while margins appear to continue to improve.
• Proposed MRT project is ambitious but we are doubtful the government will have the funding for a RM36b project which will have low financial IRR of less than 5% as this is a social economic project.
• Maintain HOLD with revised target price of RM3.26 (previously RM2.90) rolling over to FY11 EPS of 20.4 sen and average sector PER of 16x. Upgrade catalysts is the award of mega projects earlier than expected.
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