M+ Online Research Articles

Protasco Bhd - A Washed Out 2018

MalaccaSecurities
Publish date: Wed, 28 Nov 2018, 06:36 PM
An official blog in I3investor to publish research reports provided by Malacca Securities research team.

All materials published here are prepared by Malacca Securities. For latest offers on Malacca Securities trading products and news, please refer to: https://www.mplusonline.com.my

Malacca Securities Sdn Bhd

Hotline: 1300 22 1233 / 06-336 5178 (office hours: 8.30am - 5.30pm)
Tel : +606 - 337 1533 (General)
Fax : +606 - 337 1577
Email: support@mplusonline.com.my

Results Highlights

  • Protasco’s 3Q2018 net loss stood at RM0.8 mln vs. a net profit of RM10.3 mln in the previous corresponding quarter, dragged down by the weakness in five-of-the six business segments. Revenue for the quarter slipped 22.0% Y.o.Y to RM234.9 mln.
  • For 9M2018, cumulative net loss stood at RM3.9 mln vs. a net profit of RM21.5 mln recorded in the previous corresponding period. Revenue for the period declined 2.9% Y.o.Y to RM634.5 mln. The reported earnings fell short of our previous 2018 net earnings forecast of RM20.2 mln, whilst the reported revenue came within our expectations, amounting to 76.3% of our full year estimate of RM831.4 mln.
  • Segmentally, the maintenance segment’s pretax profit fell 29.3% Y.o.Y to RM13.3 mln, due to higher operating expenses and lower margins from periodic maintenance works. The construction segment’s pretax loss widened to RM4.8 mln vs. a pretax loss of RM1.8 mln in the previous corresponding quarter on cost overrun in certain projects and higher overhead costs. The bottomline’s variance is due to the higher effective tax rate of 72.0% vs. our assumption of 30.0%)
  • The property development’s pretax loss stood at RM1.6 mln vs. a net profit of RM0.3 mln in the previous corresponding quarter in the absence of new launches. The engineering services’ pretax profit slipped 49.3% Y.o.Y to RM2.6 mln on lower geotechnical works. The trading & manufacturing’s pretax loss stood at RM0.1 mln vs. a pretax profit of RM1.1 mln recorded in the previous corresponding quarter on higher interest expenses. The education segment’s pretax profit, however, jumped 28.1x Y.o.Y to RM1.1 mln on lower operational costs.

Prospects

It was another quiet quarter for Protasco with the absence of new projects secured. Moving forward, Protasco’s outstanding orderbook RM1.02 bln will sustain earnings over the next three years. The group is also bidding some RM1.00 bln worth of construction projects, comprising of affordable civil servant housings, building and infrastructure projects. However, we reckon that the general construction sector will remain subdued in view of the lack of fresh catalysts from the tabling of Budget 2019.

Meanwhile, the maintenance segment’s outstanding orderbook of approximately RM4.70 bln will continue to provide long term earnings visibility until February 2028. Moving forward, the group will be eyeing on a slice of RM926.0 mln allocation to upgrade roads, rural roads and bridges in Budget 2019.

As of 3Q2018, the group’s unsold properties amounts to approximately RM30.0 mln, mainly from De Centrum Unipark Phase 2 project. We also note that Sentrio Business Centre and D'Perdana Telipot, which has a combined GDV of RM226.0 mln that was launched in July and August 2018 respectively, have achieved satisfactory take-up rates.

Valuation and Recommendation

With the reported earnings coming below our estimates, we slashed our earnings forecast as we now expect Protasco to remain in the red with a net loss of RM3.3 mln in 2018, before returning into profitability with an expected net profit of RM25.0 mln (down from RM25.7 mln previously) for 2019. Our lower earnings assumption reflects the slower execution in both the construction and maintenance segments, coupled with margins compression due to higher overhead costs.

Following the recent weakness on its share price, we upgrade Protasco to BUY (from Hold), but with a lower target price at RM0.52 (from RM0.62). We expect Protasco’s earnings recovery in 2019 to be anchored mainly from its bread and butter businesses – construction and maintenance segments that possesses solid unbilled orderbooks.

We arrive our target price on a sum-of-parts basis by ascribing an unchanged target PER of 8.0x to its 2019 fully diluted construction earnings as well as a target PER of 8.0x (unchanged) to its fully diluted 2019 concession and engineering services’ earnings. Its education and trading units’ valuations remain pegged at target PERs of 6.0x respectively due to its smaller scale businesses, while its property development division’s valuation is derived from ascribing an unchanged 0.6x to its BV.

Risks to our forecast and target price include inability to attain the targeted construction orderbook replenishment amount, delays in project completion and failure or delay in concession contract renewals. Further tightening of monetary policies will also be unfavourable to its property development business.

Source: Mplus Research - 28 Nov 2018

Related Stocks
Market Buzz
Discussions
Be the first to like this. Showing 2 of 2 comments

CatchCrook

So “buy” again? Chong Ket Pen from Melaka ke? Melacca Securities buy call from RM1.35 until RM0.35, next maybe RM0.035. One of the culprit research report deceived EPF to use our money invested in the crook. Maybe Melacca alsp got deceived.


Daim4u Opps. Go take 6 months accounting class and learn to read proof from within protasco balance sheet.
https://klse.i3investor.com/m/blog/bursacannibal/141944.jsp

You bet can do better decision than EPF boys. EPf being cheated by Chong Ket Pen. You smarter we know. Lol.
20/11/2018 23:20

Daim4u Fundamentally zero. But criminal wise CKP has to keep buying. So buy lor keep average down till zero. Lol
20/11/2018 23:21

CatchCrook here we go. reality coming to chong ket pen.
https://klse.i3investor.com/blogs/chongketpenjudgement/183699.jsp
original report
https://judgement.law.blog/2018/10/29/globalcapital-sue-chongketpen-368million/
26/11/2018 10:08

CatchCrook looks like the chong ket pen fraud movie coming soon. grab your popcorn.
https://klse.i3investor.com/blogs/corporatefraud/161922.jsp
26/11/2018 21:13

nich0las Habis. -ve earnings.
27/11/2018 17:14

caftckp https://klse.i3investor.com/blogs/Croccaptured/184060.jsp

CKP 4 years burnt RM300mil cash and added RM600mil debt. Protasco left RM4mil cash. Wow.
28/11/2018 03:54

2018-11-28 10:49

CatchCrook

This is better. Ckp steal money from protasco to buy protasco.
https://klse.i3investor.com/m/blog/protascocursed/178459.jsp

2018-11-28 21:53

Post a Comment