KUALA LUMPUR: Boustead Holdings’ core net loss (CNL) of RM73.1mil in the first quarter ended March 31,2020 was in line with Kenanga Investment Research’s expectation.
It said on Monday it was keeping its FY20 forecasts unchanged on expected volatile quarters ahead, with the group swinging back and forth between profitability and losses, judging by past quarterly trend.
The downside to the share price may be limited by a yet to be finalised reported proposal that LTAT plans on taking Boustead private at 80 sen a share.
Kenanga Research said QoQ, Boustead’s 1QFY20 registered a narrower CNL of RM73.1mil compared to net loss of RM205mil in 4QFY19.
The losses narrowed due to better performance from pharmaceutical and Plantation which more than offset higher losses at heavy industries and trading.
The pharmaceutical division recorded a surplus of RM29.4mil compared to a loss of RM240.5mil in 4QFY19 bolstered by stronger demand from government and private hospitals in Malaysia and Indonesia.
Its plantation division returned to profitability marginally due to higher palm product prices. The trading, finance & investment division incurred a loss of RM22.4mil compared to profit before tax of RM50.1mil in 4QFY19 mainly due to stockholding losses recorded by Boustead Petroleum Marketing as a result of sharp drop in fuel prices.
“YoY, 1QFY20 CNL widened no thanks to higher losses at heavy industries and trading but cushioned by pharmaceutical and plantations. The Heavy Industries division losses widened to RM36.5mil compared to RM18.2mil in 1QFY19 due to loss from Boustead Naval Shipyard (BNS) and higher losses at Boustead Heavy Industries Corporation.
Similarly, the trading, finance & investment division recorded a deficit of RM22mil against a surplus of RM79.3mil in 1QFY19 due to lower average fuel prices. The loss incurred was mainly due to stockholding loss suffered by Boustead Petroleum Marketing as a result of sharp drop in fuel price as well as lower sales volume during the MCO period.
The Plantation division registered an improved result with a PBT of RM1.3mil against the loss before tax of RM14mil in 1QFY19. This was mainly attributed to better palm products prices.
The pharmaceutical division’s PBT rose 14% due to stronger contribution from government hospitals and lower operating costs.
“The group is expected to continue seeing volatile quarterly results based on its historical volatile earnings trend. All in, we expect the trading and manufacturing as well as pharmaceutical divisions to show pedestrian growth but deliver sustainable recurring incomes.
“Meanwhile, plantation earnings rely on CPO movement since 91% of its plantation estates are already matured of which the outlook over the short-term looks cloudy.
“The heavy industries division remains volatile with quarterly earnings oscillating between profits and losses, ” Kenanga Research said.
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