INVESTMENT HIGHLIGHTS

• 9MFY17 Results below expectations

• Earnings estimates varied to reflect slower pace of construction billings.

• Continue to bid for strategically located projects

• Nonetheless, we reiterate our BUY stance with an adjusted TP of RM0.33 per share

9MFY17 Results below expectations. 9MFY17 earnings came in below expectations. VIHB’s 9MFY17 earnings of RM5.2m (-72%YoY) came below with our estimates. Its net profit accounted for 5.2% of our full-year forecasts respectively. The stark deviation was due to lower revenue recognition from projects due to progress billings and delays in certification of construction progress.

Earnings estimates varied to reflect slower pace of construction billings. We make slight variations to our assumption as we believe that FYE18 could be a better year for VIHB to recognize its billings for is orderbook level but the progress will be slower. Thus, we trim our earnings forecast for FYE17 by -25.0% from RM99.9m to RM79.9m to reflect a slower billings recognition. This has resulted into a -30.0% reduction from the indicative value stemming from construction segment from RM806.5m to RM620.6m resulting into -22.8% of its per share value from 0.249 sen to 0.192 sen.

Continue to bid for strategically located projects. That why, we are expecting that VIHB will continue to continue to bid for affordable housing and infrastructure projects in Perak, Terengganu and Klang Valley. We have reasoned before in our previous note that the VIHB’s margin is facing stiff pressure from higher mobilization costs. The projects then would be strategic as it would be connected to mixed development with lower mobilization cost hence maintaining its current margin level.

Recommendation. We reaffirm our BUY recommendation with an TP of RM0.33 per share based on discounted cash flow (DCF) with WACC of 7.4% and an enlarged share base.

Source: MIDF Research - 4 Dec 2017