Protasco - FY13 Core Net Profit Grows 8% |
Recommended: buy
Target Price: MYR 1.80
Price: MYR 1.55
We maintain our BUY recommendation, forecasts and MYR1.80 FV. Protasco’s FY13 results met our expectations. The company is a good small-cap proxy to public infrastructure spending, particularly road maintenance and public housing. We also like its MYR10bn De Centrum integrated development in Bangi. The stock’s dividend yield is attractive at 6-7%.
- Decent FY13. Protasco’s FY13 core net profit of MYR40.6m (excluding MYR8m forex and disposal gains) came in within our expectations. FY13 core net profit grew 8% y-o-y, backed largely by improved performance from its non-concession business comprising construction, engineering services, property development, trading and education. This more than offset the lower profits from the road maintenance/concession division owing to higher cost pressure.
- Strong FY14 earnings growth seen. We project Protasco’s earnings to grow 41% in FY14, driven largely by: i) contributions from two recently secured public housing projects with a combined contract value of MYR587m, and ii) a first full-year contribution from the MYR10bn De Centrum integrated property project .
- Risks. These include: i) new construction jobs secured in FY14 falling short of our MYR200m estimate (YTD Protasco has secured MYR88m), ii) escalating input costs, and iii) poor demand for De Centrum.
- Maintain BUY. Protasco is good small-cap proxy to public infrastructure spending, particularly road maintenance and public housing. We also like the company’s MYR10bn De Centrum integrated property project, which involves the redevelopment of the 100-acre Infrastructure University Kuala Lumpur (IUKL) land in Bangi that it acquired at a very low price. A strong balance sheet (with a net cash of MYR161.4m or 49 sen per share) and highly cash-generating road maintenance concessions will underpin a 10 sen dividend, based on our forecast. This will translate into a 6-7% yield. We keep our SOP-derived FV unchanged at MYR1.80,
- valuing its IUKL land at market price, concessions by DCF, and construction and other businesses at 10x FY14 earnings