Offering massive discount to win projects. Made little sense other than trying to build up an impressive order book. Cost of manufacturing will shot up further when PH government pushes for higher minimum wage. Bottom line might not be in black.
Rohas announced that it has entered into a non-binding term sheet to acquire 40% of PMV which is the operator of two water treatment plants with expected capacity of 95 MLD in Vietnam. By benchmarking to Binh An Water treatment plant that has capacity of 100 MLD, 40% stake in PMV is expected to contribute RM4m annual profit to Rohas. This translates to c.10x P/E multiple. Rohas’ proforma net gearing would increase to 21% (from 9%). Forecast unchanged pending for more details and finalization of the deal. Potential increase of 3.5%, 2.4% and 2.1% to FY18-20 earnings post completion of deal assuming RM4m annual contribution and the deal is fully funded by debt. Maintain BUY, TP: RM1.74 (16x FY18 P/E).
Looking at the 3Q18 result, a lot of investors are getting worried that the profit of only RM100k would be the new norm for the company. However, the reason for the very low profit level was due to an LAD of RM4.1mil relating to a previous already completed EPCC project. Excluding this, the profit would have actually been around RM4.2mil (which is still 40% lower vs 3Q17).
Excluding none core costs (impairments, forex losses and LAD), Rohas 9m18 core net profit is actually higher at RM18.5mil. Assuming that the company managed to achieved a PAT of RM7mil in 4Q, this would bring the total core profit for FY18 to RM25mil. At the current share price, the company is valued at 13x PE which is not high but still above the average construction industry PE of around 10x. It has an EPCC orderbook of around RM450mil which is expected to provide steady revenue and profit for the next 2 FYs. Near-term issue that it currently faces are delays in some of its projects both domestically and abroad (Laos in particular). Revenue should normalize in FY19.
The company has a strong balance sheet with net gearing of only 8.2% giving it the ability to take on more EPCC projects in the near future. Management has indicated that they will be trying to add around RM500mil to their current orderbooks in FY19.
If you are looking to diversify your portfolio outside of Rohas (due to earnings uncertainties relating to project delays), I would recommend you to look at MBMR.
MBMR is a direct proxy to Perodua via its 22.6% interest in the company. Valuation is cheap at only 6.3x PE (based on target FY18 PATAMI of RM145mil. 9m PATAMI is already RM106mil). PB is low at only 0.6x BV. 4Q18 results is expected to be higher than 3Q18 and last year's 4Q17.
For FY19 growth will be driven by the still high demand of new Myvi and the newly launched SUV and also the new Alza in 2H19.
Please go through the analyst reports (https://klse.i3investor.com/servlets/stk/pt/5983.jsp) and do your own analysis before making any decisions. Most analysts have a TP of above RM3 for the company with Hong Leong being the lowest at RM3.13 and Maybank the highest at RM4.50.
The Group recorded a revenue of RM146.9 million in the current quarter, an increase of RM69.0 million or 88.5%, compared
to its immediate preceding quarter's revenue of RM77.9 million. The increase in group revenue were mainly contributed by
the EPCC segment that had a higher revenue recognised by RM57.0 million or 127.0%, and an increased in revenue for
tower fabrication segment by RM14.8 million or 49.7% due to higher deliveries. Revenue from other business activities
segment decreased mainly due to lesser work from fabrication of electrical substation structure by RM2.8 million or 86.3%.
The Group's EPCC segment contributed to revenue of RM235.4 million, an increase by RM108.5 million or 85.5% from the
preceding corresponding period of RM126.8 million, which was mainly contributed from EPCC works done in Bangladesh
and Malaysia that contributed to 58.5% of total Group revenue. Revenue from other business activities of RM13.1 million also
increased by RM5.9 million or 81.9% from the preceding corresponding period of RM7.2 million mainly from fabrication of
electrical substation structure. Revenue from tower fabrication segment of RM153.6 million, decreased by RM23.1 million or
13.1% from the preceding corresponding period of RM176.7 million, due to decrease in deliveries of towers.
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....
bleuerouge
3,221 posts
Posted by bleuerouge > 2017-08-15 17:43 | Report Abuse
finally a breakthru..;-)