Maintain BUY recommendation with higher target price (TP) of RM1.75
- Protasco’s 3Q2016 net profit declined 7.0% Y.o.Y to RM14.3 mln, dragged down by the weakness in the maintenance segment due to the non-renewal of two state roads maintenance contracts, coupled with lower contributions from its property development segment with the near completion of Phase 1 of De Centrum project. Revenue for the quarter fell marginally by 0.4% Y.o.Y to RM302.8 mln.
- Cumulative 9M2016 net profit slipped 9.1% Y.o.Y to RM42.0 mln. Revenue for the period fell marginally, by 0.9% Y.o.Y to RM826.1 mln. Despite that, the reported earnings came slightly above our expectations, accounting to 77.2% of our previous full year net profit forecast of RM54.4 mln. The reported revenue, meanwhile, only amounted to 71.5% of our previous revenue forecast of RM1.16 bln.
- Segmentally, the maintenance division’s 3Q2016 pretax profit slumped 66.7% Y.o.Y to RM8.9 mln on the non-renewal of two state roads maintenance contracts. The construction segment’s pretax profit, however, surged 5.1x to RM0.9 mln on higher billings from Phase 1 of the PPA1M project, which is at 96% completion.
- Its property development segment’s pretax profit jumped 180.6% Y.o.Y to RM6.2 mln on minor cost adjustment after the completion of Phase 1, while Phase 2A is at 81.0% completion. The engineering services’ segment pretax profit sank 55.4% Y.o.Y to RM33,000 on lower geotechnical and soil works. The trading & manufacturing segment’s pretax profit added 64.1% Y.o.Y to RM0.9 mln, while the education segment’s pretax profit soared 320.9% Y.o.Y to RM0.8 mln on an increase in student intake. An interim dividend of 3.0 sen per share was declared.