Toning things down
Despite lower land sale gains in FY6/13, its full-year net profit was in line at 97% of our forecast. The timing of incoming land sales in Melaka underpins FY14 EPS, but prospects in Tanjung Piai (Iskandar) still hinge on the much-awaited signing of the maiden contract.
We hope that the SPA for the Tanjung Piai reclamation job concludes by end-2013. Pending more clarity, we cut our assumptions for Tanjung Piai and raise our RNAV target discount from 20% to 30%, which leads to a lower target price. It is still worth a trade given a likely pick-up in newsflow within the next three months. Trading Buy maintained. The stock is not an outperform due to timing risks.
FY13 lacks land sale gains
FY13 core net profit of RM56m was in line at 97% of our forecast, but was 22% below consensus. The steep yoy decline was due to fewer land sale transactions for the Melaka project. Benalec booked RM4.3m in land sale gains for FY13 (pretax level) vs. RM64.2m in FY12.. As a result of lower land sale gains, the 28.3% EBITDA margin for FY13 was less than half of the 75% margin achieved in FY12. The absence of dividends (we expected 3 sen for the full year) was a negative surprise, but we keep our DPS forecasts.
Benalec's fundamentals are intact and will substantially get a boost once it locks in the contract for phase 1 of the reclamation project in Tanjung Piai, Iskandar. We gather that the extended deadline of end-2013 for the signing of the sale and purchase agreement (SPA) is still achievable. There appears to be little progress made thus far, but management indicated that the approval milestones for the environmental impact assessment (EIA) and conditions for the SPA should gather momentum from Sep/Oct onwards.
Still worth a trade
The higher RNAV discount applied to our revised RNAV reflects the greater timing risks. However, it is still worth a trade as newsflow on large-scale projects in Iskandar such as the Tanjung Piai oil and gas hub could pick up in the medium term.