PETALING JAYA: Taliworks Corp Bhd
, which posted an almost 70% fall in net profit for the third quarter ended Sept 30, 2022 (3Q22), is set for a rebound in earnings in the near term.
RHB Research, which is maintaining its “buy” call on Taliworks, said it continues to favour the stock for its defensive earnings base, attractive yields and new income stream from solar assets.
“Post 3Q22 results, we are revising our financial year 2022 (FY22) to FY24 earnings by minus 6%, minus 4% and minus 2% to reflect a lower share of associate’s performance from SWM Environment (its waste management arm) that will persist due to a higher dividend paid on preference shares,” said RHB Research.
“Although the nine-month earnings of RM33.7mil are 59% of our latest FY22 earnings estimates of RM57mil, we understand that Taliworks is awaiting the toll compensation payment by the end of 4Q22, worth about RM12mil (pre-tax basis).
“Its solar assets should see stronger contributions following the panel replacements for the SaTerm solar asset in early November, increasing the performance ratio to about 90% from 70%,” the research house added.
However, RHB Research identified key risks for Taliworks, including a slower than expected economic recovery and changes in government policies.
Taliworks saw its net profit drop by 69.7% to RM12.51mil in 3Q22 from RM41.36mil a year ago.
Revenue for the quarter fell by 10.7% to RM91.28mil compared with RM102.31mil in the previous year, due to lower revenue from its toll segment. Its earnings per share declined to 0.62 sen from 2.05 sen in 3Q21.
For the nine months, Taliworks reported a lower net profit of RM34.14mil compared with RM66.31mil a year ago, but a higher revenue of RM251.86mil against RM229.85mil previously.
The group declared a third interim single-tier dividend of 1.65 sen per share, amounting to RM33.3mil, payable on Dec 23.
To date, Taliworks has declared a total dividend payout of 4.95 sen per share with respect to FY22.
Hong Leong Investment Bank (HLIB) Research expects the group as a whole to chalk up steady earnings performance going forward.
“Construction is slowly picking up and should contribute meaningfully in FY23. Despite the results miss, we keep our forecasts unchanged as earnings in 4Q22 could still catch up, driven by pending toll compensation,” it said.
HLIB Research said it is downgrading Taliworks to “hold” with a lower target price of 91 sen from RM1.00 after updating its valuation parameters.
Taliworks’ defensive source of earnings should anchor its healthy yield of 7.4%, HLIB Research noted.
Taliworks is an established infrastructure company engaged in water treatment, supply and distribution, highway and toll management, waste management, engineering and construction, and renewable energy.
