Review
Signature International’s (Signature) achieved another record profit in
3QFY15, boosting the YTD core earnings to RM31.1mn. This was within
our expectation and the cumulative earnings accounted for 76% of our fullyear forecast and 80% of consensus estimates.
Signature’s 9MFY15 earnings grew more than 200% YoY to RM31.1mn
underpinned by higher project revenue and retail sales. PBT margin
increased by 8.3%-pts to 20.1% due to economies of scale in
production.
On a sequential basis, earnings grew 10.4% QoQ to RM13.4mn as
project revenue surged as much as 24.6%. In this quarter, the project
revenue continued to dominate the topline with 82% contribution.
However, retail sales also improved by 16.8% QoQ with the slew of
housing projects completions in 2014.
Trade receivables increased 69% to RM119mn in 3QFY15 vs. RM70.6mn in
4QFY14. This was in line with higher project revenue, where collections
will usually take 120-150 days. The long collection period also contributed
to a general provision of RM5.7mn in 3QFY15 (RM1.2mn in 3QFY14), which
the group can write back in the future. As far as cash was concerned,
Signature managed to turn into a net cash position of RM5.7mn despite
higher receivable as at Mar-15. This has prompted the company to declare
its first ever interim dividend of 4sen/share in 3QFY15.
Impact
No change to our FY15-18 earnings projections.
Outlook
Project revenue to drive earnings higher. The quarterly project
revenue topped RM70mn with current orderbook stood at RM154mn.
According to management, the company expects some RM40mn jobs,
which put out to tender in 2014, to be finalized and project awards to
take place in 2H15. This will replenish the group’s outstanding
orderbook to RM194mn, if the company manages to secure all the jobs.
Meanwhile, the groups’ tender book stayed healthy at RM400mn.
Retail sales not affected much by GST. We are also upbeat with the
strong retail sales performance. We understand from management
that the company has raked in RM5mn sales during the recent 4-day
HOMEDEC fair held at KLCC Convention Centre, which represents circa
10% of annual sales (~38% of quarterly sales). Importantly, the strong
sales are bucking the current weak property trend as well as consumer
spending post GST implementation
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