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Tuesday, August 30, 2016


Author: PublicInvest | Publish date: Tue, 30 Aug 2016, 09:56 AM

Mega First (MFCB) registered a 1HFY16 core net profit of RM19.8m after stripping out construction profit of RM40.9m for the Don Sahong Hydropower Project in Laos and other exceptional items totaling RM1.6m. The results are in line, making up 41% of our full-year earnings forecasts, considering 2H is always seasonally stronger. No dividend was declared for the quarter. We maintain our Outperform call with an unchanged TP of RM2.29.

2QFY16 revenue (QoQ: -9.5%, YoY: +33.6%). Excluding the construction revenue of RM61.1m for the Don Sahong Hydropower project in Laos, Group’s revenue would have fallen 7.7% YoY. Power contributions fell 15.6% YoY to RM96.9m, mainly due to weaker sales from both China and Tawau power operations. Tawau’s power revenue slipped 30.1% YoY, attributed to the shorter operating hours (-13.8%). Meanwhile, China’s sales volume of steam and energy dropped 7.7% and 8.8%, respectively. Average steam price and energy tariff contracted 9.3% and 6.4%, respectively. Resources business grew 11.3% YoY to RM23.7m, led by higher sales volume of lime products in both local and export markets and favourable FX translation gain, partially offset by weaker lime product prices. Property revenue jumped 62.9% YoY to RM62.9m, attributed to final progress billings of a residential development project in Melaka.

2QFY16 core net profit (QoQ: +11.7%, YoY: -42.3%). Excluding the construction profit of RM16.2m, the group would have made only RM31.7m, down 7.5% YoY for the quarter, due to weaker earnings contribution from power (-22.8%) and resources (-7.6%). Power segment experienced a lag in the adjustment of steam prices and lower tariffs, partially offset by favourable FX translation from the China operations. Resources segment suffered from margin erosion in lime products, attributed to higher interest expense and depreciation charges as a result of the newly commissioned kiln and hydration plant and weaker limestone selling prices.

Prospects. Management sees steam sales in China remains weak in 2H, mainly affected by poor industrial demand. The hydropower project in Laos remains on track with 7.4% completion as of today. Meanwhile, the limestone business is expected to be stronger in the remaining quarters, buoyed by better demand from the regional markets.

Share price performed well. Share price moved up close to 10% while volume doubled over the last one month. For those investors, who bought the shares and subscribed for the rights issue, their position should be in the money at current share price

Source: PublicInvest Research - 30 Aug 2016

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