HOLD; PRICE RM5.41
Results highlights
- Below; maintain Hold. Boustead's FY11 core net profit, which excludes RM247m one-offs, was below expectations at only 87% of our forecast and 85% of consensus numbers. A weaker-than-expected heavy industries division weighed down group earnings. Despite factoring in higher CPO prices and a lower tax rate, we reduce our ex-bonus FY12-13 core EPS by 6.4-6.6% due to slower progress billings for heavy industries and a lower contribution from Pharmaniaga which is now 67.2% owned instead of 98%. We make several key changes to our RNAV computation 1) update for the current value of listed assets, 2) raise our plantation valuation and 3) update Boustead's stake in Pharmaniaga. The net effect is a rise in our RNAV value. But we pare down our RNAV-based target price from RM5.47 to RM5.24 as we now apply a 10% RNAV discount in view of its volatile earnings. We continue to rate Boustead a Hold as there are no immediate catalysts.
- Sequentially weaker. 4Q11 core net profit fell 46% qoq as heavy industries slipped from RM22.9m EBIT in 3Q11 to RM11.5m loss in 4Q11 due to cost escalation for certain commercial shipbuilding projects. Plantation earnings also sank 65% qoq because of the absence of dividend income from Boustead REIT as well as a 12% drop in FFB output and a weaker CPO price. Boustead achieved an average CPO price of RM3,002 per tonne for the current quarter (RM3,186 per tonne in 3Q). Property, on the other hand, notched up a 32% qoq rise in EBIT due to fair value gains while pharmaceutical earnings rose 10% qoq on the back of higher selling prices and productivity. Earnings from manufacturing and trading gained 56% qoq, courtesy of higher sales volume for petrol retailer, BH Petrol.
- Cutting FY12-13 EPS. Despite factoring in higher CPO price forecasts and a lower tax rate, we reduce our ex-bonus FY12-13 core EPS by 6.4-6.6% due to slower progress billings for heavy industries and a lower contribution from Pharmaniaga. We expect earnings from heavy industries to remain weak as work on the six naval vessels remains at the preliminary stage.
Recommendation
Maintain Hold with a lower target price. Despite raising our CPO price forecasts from RM2,700 to RM2,970 for FY12 and from RM2,800 from RM3,060 for FY13, as well as lower our tax rate from 15% to 12%, we reduce our ex-bonus FY12-13 core EPS by 6.4-6.6% due to slower progress billings for heavy industries and a lower contribution from Pharmaniaga in which Boustead has reduced its effective stake from 98% to 67.2%. We make several key changes to our RNAV computation 1) update for the current value of listed assets, 2) raise our plantation valuation and 3) update Boustead''s stake in Pharmaniaga. The net effect is a rise in our RNAV value. But we pare down our RNAV-based target price from RM5.47 to RM5.24 as we now apply a 10% RNAV discount (instead of parity) in view of its volatile earnings. We continue to rate Boustead a Hold as there are no immediate catalysts. The share price should be supported by its decent gross yields of 6.6%. We recommend investors to switch to DRB-Hicom (DRB MK, Outperform).
Maintain Hold with a lower target price. Despite raising our CPO price forecasts from RM2,700 to RM2,970 for FY12 and from RM2,800 from RM3,060 for FY13, as well as lower our tax rate from 15% to 12%, we reduce our ex-bonus FY12-13 core EPS by 6.4-6.6% due to slower progress billings for heavy industries and a lower contribution from Pharmaniaga in which Boustead has reduced its effective stake from 98% to 67.2%. We make several key changes to our RNAV computation 1) update for the current value of listed assets, 2) raise our plantation valuation and 3) update Boustead''s stake in Pharmaniaga. The net effect is a rise in our RNAV value. But we pare down our RNAV-based target price from RM5.47 to RM5.24 as we now apply a 10% RNAV discount (instead of parity) in view of its volatile earnings. We continue to rate Boustead a Hold as there are no immediate catalysts. The share price should be supported by its decent gross yields of 6.6%. We recommend investors to switch to DRB-Hicom (DRB MK, Outperform).
Source: CIMB Trader AM - 28th Feb 2012
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