KUMPULAN Powernet Bhd saw its 2020 full financial year results coming in above expectations, with RHB Investment Bank noting that the results are supported by higher-than-expected project billings.
“Powernet’s FY20 results beat our expectations on higher-than-expected project billings, despite the delay in its property development projects during the Movement Control Order
(MCO) period. We expect the company to continue delivering strong earnings growth, backed by its expanding orderbook,” said RHB analyst Sean Lim.
This follows Powernet reporting a core net profit of RM12.8 mil for FY20, which accounts for 136% of RHB’s expectations. A large part of this came from the group’s earnings for the fourth quarter of FY20, which came in at RM7.3 mil. This also offset the weaker contributions from its property development business.
“FY20 earnings skyrocketed by 2,532% year-on-year (yoy) to RM12.8 mil, from a minimal profit of RM0.5 mil in FY19,” said Lim.
The analyst also noted that Powernet is aiming for its orderbook, which stood at RM1.1 bil at the end of FY20, to hit RM2 bil by the end of FY21, a replenishment of over RM1 bil.
Lim pointed out that the current bid value for Powernet stands at RM3.1 bil, of which 66% is from the energy segment, followed by the infrastructure and utilities sectors at 33% and 1% respectively.
Powernet also faced delays in the development of its only commercial project in Sentul due to the MCO. The project, which has a gross development value of RM41 mil, is 60% completed as of mid-August, and saw minimal revenue recognition for the group’s fourth quarter, ended June 30.
“We understand that the progress has been rather slow, even when construction activities have resumed, and the expected completion date has been pushed back further to early 2021. The unbilled sales of RM12 mil will be recognised largely in 1HFY21,” said Lim.
RHB maintained a buy call on Powernet, with a higher target price of RM3.77 from a previous RM3.46.
“We are upbeat on this stock, as it offers strong earnings growth. This, in turn, is premised on the potential doubling of its orderbook by end-FY21, superior return on equity, and its undemanding market valuation of 10.6x,” said Lim.
At the end of the morning’s trading, Powernet’s shares were last done at RM2.92, up 7 sen, with 2.37 million shares traded. – Aug 24, 2020
