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Wednesday, November 25, 2015

Mega First Corporation - Earnings On Track

Mega First (MFCB) registered a 9MFY15 core net profit of RM43m (-32.2%) after stripping out net unrealized foreign exchange (FX) gain of RM18.5m and RM2m impairment loss on project development expenditure. Despite the weaker earnings, the results were within our expectations, making up 77% of our full-year estimates. No dividend was declared for the quarter. We reaffirm our Outperform call with an unchanged TP of RM3.14.
  • 3QFY15 revenue (QoQ: -1.5%, YoY: -11.3%). All core segments contributed to the weaker revenue. Power segment fell 3.1% YoY to RM111.6m due to lower sales in its China and Tawau operations. The China plant was dragged by lower sales volume of steam (-4%) and energy (-5.9%) as well as lower average steam price (-10.4%) and energy tariff (-4.3%) as a result of downward tariff adjustments. Tawau was hit by shorter operating hours (-7.7%) and also lower fuel oil prices (-35.5%). Resources sales, which were hit by slower exports, dropped 16.5% YoY to RM23.7m. Despite higher average selling prices on the back of a stronger US dollar, the weaker sales were also affected by the temporary decommissioning of 2 lime kilns. Property sales slumped 76% YoY as there were lower unit sales due to the soft market conditions.
  • 3QFY15 core net profit (QoQ: -8.6%, YoY: -32.2%). Power pre-tax earnings gained 25% YoY to RM39.7m on the back of FX gains from Renminbi fixed deposits and translation gains from the operating profits. On the other hand, resources pre-tax profit fell 4.5% YoY due to weaker export sales and higher production costs as well as higher borrowing costs incurred due to the capacity expansion in 1H. Property earnings fell to less than RM1m as there were no new property launches in 2015.
  • Prospects. The construction of Don Sahong Hydropower project has started since last month. The Group is expected to recognize construction profits over the construction period of four years starting from next year. On the resources segment, a new 400mt/day quicklime plant has been commissioned since Aug while 2 lime kilns have been temporarily shut down for repair and maintenance works with no production disruptions anticipated due to the slower export demand currently. Lastly, the Group has suspended new property launches due to the soft market conditions.
  • Reiterating our Outperform call. MFCB’s share price has moved up more than 20% since announcing the securing of concession rights for the hydropower project in Laos. We maintain our Outperform call with an unchanged TP of RM3.14 as we are positive on the company’s long-term outlook.
Source: PublicInvest Research - 24 Nov 2015

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