DESTINI BERHAD
KLSE (MYR): DESTINI (7212)
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
commonsense
492 posts
Posted by commonsense > 2018-12-01 08:06 | Report Abuse
Was very surprised by the sudden drop of revenue from above RM100mil per quarter to only RM11mil. I am not sure if this will be permanent or just a one off very bad quarter.
From my understanding, they still have firm contracts in their books. Some of the contracts are listed below:
RM366mil for the helicopter contract to Malaysia Army.
RM 120mil for the remaining 2 patrol vessel to be deliver to Malaysia Maritime Enforcement
RM20mil decommissioning work from Petronas.
RM138mil MRO contract form Malaysia Defense.
That being said, most of these contracts are won before the general election. So i am not sure if the current government is reviewing them back or not. 80% of Destini order book are from the government.
Valuation wise, we need to wait to see the future PAT of the group first. I don't think past 12 months pat is reflective of the company current situation.
Company net asset is 44sens per share but if you exclude the RM206mil intangible the book value actually drops to only RM0.26/ share. Most of the remaining tangible assets is in trade receivables (RM515mil) which is most probably due from the govt. I think the govt would honor that, just it might take some time for them to pay. At 19 sens per share, the company is currently trading at only 0.7xBV.
Might be safer for those that are interested in the company to wait for next quarter result in order to see if the low revenue level is permanent or not.
For those that are already invested, you might need to be ready to face some volatility if you decide to still hold onto the stock.
Destini is not the only one facing uncertainties from govt contract (Prestaring, Dnex, Myeg, MRT and LRT players to name a few). But in the end, the govt has always been able to find a middle ground in its tough stance when renegotiating with businesses.
If you are looking for companies that are not exposed to govt contracts, i would recommend MBMR. The company is a direct proxy to Perodua via its 22.6% interest in the company. Valuation is cheap at only 5.3x PE (based on target FY18 PATAMI of RM145mil. 9m PATAMI is already RM106mil). PB is low at only 0.5xBV. 4Q18 results is expected to be higher than 3Q18 and last year 4Q17. Please go through analyst reports (https://klse.i3investor.com/servlets/stk/pt/5983.jsp) and do your own analyse before making any decisions.
Good luck.