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Saturday, February 27, 2016

Mega First - Growth Assured

Mega First - Growth Assured

Author: PublicInvest   |   Publish date: Fri, 26 Feb 2016, 09:49 AM 

Mega First (MFCB) registered a FY15 core net profit of RM51.8m (-9.6%) after stripping out net foreign exchange (FX) gain of RM32.5m and other one-off expenses totaling RM6.7m. Despite the weaker earnings, the results were broadly within our expectations, making up 94% of our full-year estimates. A DPS of 8sen was proposed for the quarter. We reaffirm our Outperform call with an unchanged TP of RM3.14.
  • 4QFY15 revenue (QoQ: +9.3%, YoY: -0.6%). Revenue numbers remained firm despite weaker power sales. Power contributions fell 4.9% YoY to RM116.8m due to lower sales in its China and Tawau operations. The China plant was dragged by lower sales volume of steam (-8%) and energy (-6%) as well as lower average steam price and energy tariff as a result of downward tariff adjustments. Tawau was hit by shorter operating hours (-13.1%) and also lower fuel oil prices (-34.5%). Resources sales were supported by increased sales volume in lime products, driven by higher local consumption. Property sales rose 36.7% YoY led by higher property sales and progress billing during the quarter.
  • 4QFY15 core net profit (QoQ: -28.1%, YoY: +40.8%). Power pre-tax earnings gained 5.3% YoY to RM38m on the back of recovery of short-billings from previous years. On the other hand, resources pre-tax profit slumped 67% YoY due to margin compression in lime products resulting from higher raw material costs, higher interest cost for capacity expansion and staff rationalization. Property earnings fell to RM1.3m as there were no new property launches in 2015.
  • Prospects. The construction of Don Sahong Hydropower project has started since October last year. The Group is expected to recognize construction profits over the construction period of next four years starting from next year. We expect additional earnings contribution of RM35m-38m per annum to the Group’s bottomline for 2016-2019, which is an increase of 63-67% from FY15.
  • A “yes” to the rights issue. The seven-for-10 rights issue proposed by the company recently at an issue price of RM1.59, a 21% discount to the theoretical ex-rights price of RM2.01 is deemed attractive for the long-term returns in Laos hydropower project. We encourage investors to subscribe for the rights issue.
  • Reiterating our Outperform call. MFCB’s share price has been holding at around the RM2.30 level due to ongoing rights issue exercise. We reaffirm our Outperform call with an unchanged TP of RM3.14 as we are positive on the company’s long-term outlook.
Source: PublicInvest Research - 26 Feb 2016

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