Off To a Good Start
PGHB’s MYR13.8m 1QFY14 net earnings (+10.4% y-o-y, +9.0% q-o-q) were largely in line with our and streets’ estimates. The trading division was affected by slower project execution but manufacturing continues to show commendable earnings. A 1.2 sen interim dividend was declared. We maintain our positive view on the outlook of the Company, retaining out BUY recommendation with FV MYR1.43 unchanged.
- Earnings in line. PGHB’s MYR13.8m reported net profit (+10.4% y-o-y, +9.0% q-o-q) was largely in line with our estimates. Revenue from its trading division (-12% y-o-y) was affected by slower project execution in the oil & gas (O&G) sector, which we believe was due to pre-General Election uncertainties. Additionally, increased operating expenses and a product mix change also narrowed down this segment’s profit margins. Nonetheless, PGHB’s manufacturing division continues to shine brightly, reporting revenue of MYR82.5m (+50% y-o-y) and higher segmental profit of MYR12.2m (+160% y-o-y). This was mainly attributed to an increase in output and improved product mix. All-in-all, its overall performance was in line with what we expected, with all its business arms contributing positively and the Group charting a positive growth.
- Positive outlook remain. We still remain positive on PGHB for its potential growth, particularly from the manufacturing division. Sales in its trading division may pick up eventually in the near-term, as we are still bullish on the local O&G sector, which is being driven by Petronas’ aggressive capex spend. Furthermore, the Group is also expanding overseas aggressively to diversify its income stream.
- Dividend payout maintained. PGHB is maintaining its dividend payout by declaring a 1.2 sen single tier interim dividend this quarter. Our assumptions are based on a conservative 30% dividend payout in FY14F, which could translate to a dividend yield of 3.0% (based on the last closing price). We deem the yield as still attractive for a growing company.
- BUY, FV unchanged. We continue to like PGHB for its solid business foundation and bright prospects, hence maintaining our BUY recommendation with FV MYR1.43 pegged to 13x FY14F P/E.
Publish date: 25/07/13