Selangor Dredging Bhd (Kenanga Research) hold; target price RM1.07

Selangor Dredging
FY10 net profit within expectations

• FY10 net profit of RM18.0m was inline with our full year forecast of RM17.7m. Revenue was 43% higher on the back of billing from Five Stones and 20Trees new launch of Five Stones and higher billings from 20 Trees which is completing soon . Advance stages of completion for 20Trees has enable better cost estimation and revenue recognition, translating to higher EBITDA margins. In addition the mix of higher price Five Stones sales has also boosted the margin.

• YoY, FY10 net profit 18.0m was only 4% higher despite 43% higher turnover as in FY09 there was a one-off exceptional gain of RM22.5m on revaluation surplus on its properti es. Excluding the one off gain, FY09 would have been in a net loss of RM5.3m.

• YoY, 4Q10 net profit of RM10.4m is 125% higher on the back of higher progress billings with revenue up 54% and also RM7.2m investment income compared with a loss of RM0.4m in 4Q09. l QoQ 4Q10 net profit was 233% higher as investment income boosted the net profit. Otherwise EBITDA was flat.

l We are maintaining our forecast. Five Stone second phase of 192 units with GDV of RM210m launched in January 2010 and is almost fully sold and as such we are maintaining FY11 forecast. Gilstead Road will be launched before end of 2010 which would boost earnings as 20Trees will be completed by then.

• Maintain HOLD with existing target price of RM1.07 based on RNAV. Rerating catalyst for the stock is the resolution of the problems in relation to 21 Damansara which will generate at least RM200m GDV.