Benalec posts more poor results

Benalec posts more poor results
Business & Markets 2013
Written by BIMB Securities
Friday, 31 May 2013 11:14


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Benalec Holdings Bhd
(May 30, RM1.41)
Downgrade to neutral at RM1.38 with a revised target price of RM1.25: Benalec’s results for the first nine months of the 2013 financial year ending June (9MFY13) results came in below our and consensus expectations, accounting for only 54% and 55% of total earnings projection. Net profit of RM54.4 million dropped by 24.4% year-to-date (YTD) from RM72 million in 9MFY12, despite revenue increasing by about 41% YTD to RM183.9 million (9MFY12: RM130.4 million).

Pre-tax profit for the quarter dropped 36.5% and net profit 50.2% quarter-on-quarter in tandem with a 10% drop in revenue to RM59.8 million from RM66.4 million. This is mainly attributed to the 75% higher cost of sales (COS) compared with 42% in the first quarter (1Q) and 58.1% in 2Q, leading to a 46.3% drop in gross profit.

Reflecting the higher COS, profit margins in 3Q declined markedly to 17% to 25% against 40% to 60% in 1Q and 32% to 42% in 2Q, despite the improved in year-on-year top line numbers. Net profit margin was compressed to 17.6% compared with 39.5% and 31.8% for the previous two quarters.

The outlook for the domestic CONSTRUCTION [] and oil and gas sectors is expected to remain strong as outlined in the 10th Malaysia Plan and the Economic Transformation Programme in relation to the proposed petroleum and petrochemical hubs and maritime industrial parks, located on the Tanjung Piai and Pengerang coasts. We reckon this will augur well for Benalec’s land reclamation and should provide the group with a sustainable order book for the next 10 to 15 years. However, we expect the slower recognition of earnings will continue for the next few quarters, thus the less than sanguine prospective earnings forecasts. — BIMB Securities, May 30


This article first appeared in The Edge Financial Daily, on May 31, 2013.