Boustead seen undervalued


  • Business
  • Wednesday, 27 May 2015

Boustead Holdings Bhd

By HLIB Research

Buy (maintained)

Target price: RM4.91

Boustead Holdings Bhd’s first quarter ended March 31, 2015 core net profit of RM17.3mil was below HLIB Research’s expectations, and accounted for only 6.3% of its full-year forecast.

Core net profit fell 74.1% to RM17.3mil mainly on the back of weaker palm product prices and fresh fruit bunch (FFB) production and lower loans growth and net interest margin, coupled with the one-off provisioning, which dragged associate Affin Holdings’ earnings contribution .

Boustead declared a first single-tier interim dividend per share of 5 sen, payable on June 30, 2015.

Risks that could impact the company include lower-than-expected revenue contributions from different divisions and/or margins falling short of expectations as well as relatively high gearing.

HLIB cut net profit forecasts for the financial year ending Dec 31, 2015 and 2016 by 23.2% and 9.9%, largely to reflect a lower earnings assumption at Affin Group, and lower earnings assumption at the trading division.

The research house still thinks Boustead is undervalued given the deep embedded values of the group, relatively high and quarterly net dividend yield and market yet to fully appreciate the hidden values.

However, it said the group has relatively high gearing and is a complicated group.

There are also quarterly fluctuation in earnings and weak near-term earnings outlook. HLIB’s sum-of-parts derived target price cut by 11.4%, from RM5.54 previously to RM4.91 to reflect lower earnings forecasts and latest market prices for Boustead Plant and BHIC. It maintains a “buy” recommendation on the stock.

Wah Seong Corp Bhd

By PublicInvest Research

Outperform (maintained)

Target price: RM1.64

Wah Seong Corp Bhd’s first quarter ended March 31, 2015 recorded revenue of RM522.8mil from a higher level of activity in the oil and gas and industrial trading and services segment.

Net profit fell to RM10mil, 52.3% lower than a year ago, but adding back the minority interest portion would bring PATAMI up to RM26.4mil.

Net profit was affected by higher expenses from accruals and provisions which PublicInvest Research understands are mainly one-offs, and thus concede the group’s performance will be back on track to meet its financial year ending Dec 31, 2015 estimates.

It maintains an “outperform” call with a rolled-over target price of RM1.64 pegged to 12 times price earnings (PE) multiple to 2016 earnings per share estimate of 13.7 sen.

The research house adjusted its PE lower to account for the uncertainties in oil price trends thus leading to a potential slowdown in award of new major contracts.

Wah Seong recorded accruals and provisions amounting to RM32mil which include the Socotherm arbitration award, unrealised forex losses, provision for the plantation division which to-date has only 600ha planted is thus still at its development stages, and provision for industrial services.

Pre-tax profit was affected further by start-up activities in Wah Seong’s US jointly controlled entity, and thus offset profit from strategic stakes in Alam-PE and Petra Energy (26.9%) and its growing renewable energy segment from biomass ventures in Cambodia.

Barakah Offshore Petroleum Bhd

By BIMB Securities Research

Buy (maintained)

Target price: 96 sen

Barakah Offshore Petroleum Bhd has been awarded a contract from Sarawak Shell for the supply of operational pipeline inspection gauges, accessories and related equipment and services.

The operation will be carried out offshore Sarawak and Sabah mainly for the operational maintenance of pipelines.

The total contract value will depend on the work orders by Shell, but BIMB Securities Research understands that the contract value range between RM5mil to RM10mil.

The contract duration is for three years effective from April 15, 2015 till April 14, 2018, with an option to extend for another one year.

Including this, Barakah has successfully secured a total of RM130mil worth of contracts year-to-date, hence putting its latest outstanding orderbook at RM1.8bil which will last until 2017.

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Business , Boustead , Wah Seong , Barakah , analyst reports ,

   

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