4Q21: Record quarterly profit
Maintain HOLD with a revised MYR1.58 TP
4Q21 net profit exceeded our expectation for the 2nd sequential quarter with the beat coming from stronger construction works momentum and recalibration of margins for projects nearing completion. We however lower FY22/23E net profit by 6%/11% respectively on revised job wins forecasts. Our new TP is MYR1.58 (-11sen) on unchanged 15x FY22E PER (-1SD of mean, reflecting higher material cost and orderbook risks).
Even stronger if not for impairment/provision
4Q21 net profit of MYR65m (highest ever) more than tripled QoQ on full resumption of activities after MCO 3.0 which affected 3Q21. Construction revenue more than doubled QoQ, while EBIT margin rose 4.7ppts QoQ as margins recalibration continued for the 2nd consecutive quarter, for projects nearing completion. 4Q21 profit would have been even stronger if not for receivables impairment (MYR10m) and legal fees provision (MYR17m). FY21 net profit of MYR113m (+55% YoY) was >40% above our/ consensus forecasts. A 2nd interim DPS of 4sen will be paid on 7 Apr (ex date 14 Mar), bringing FY21 DPS to 5.25sen (60% DPR).
MYR4.8b outstanding orderbook; targets MYR2b wins
Jobs secured in FY21 totaled MYR1.5b (FY20: MYR2.3b) while outstanding orderbook was MYR4.8b end-2021. Active tender book presently is about MYR4.3b comprising a mix of civil infrastructure works, overseas (including in India) and domestic PFI projects. The internal job win target for FY22 is MYR2b; we have assumed the same. Meanwhile, its new precast plant in SG which is on schedule to be operational by 2H22 would also help in orderbook replenishment.
Revising forecasts; ESG risk score has improved
Our downward earnings revisions for FY22/23E mainly incorporate lower MYR1.5b job wins in FY21 (vs. MYR2b earlier) and MYR2b in FY22E (vs. MYR2.3b earlier). Our FY22E profit has also incorporated Cukai Makmur; we estimate a 4+% impact on net profit. Elsewhere, SCGB’s risk score by Sustainalytics (see page 3) is down in the latter’s latest update (13 Oct 2021), reflecting improved ESG risk management.