wz satu€¦ · 19/10/2016 · founder of wz satu berhad (previously known as weng zheng resources...

19 October 2016

Affin Hwang Investment Bank Bhd (14389-U)

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Premier contractor

WZ Satu (WZS) is an established subcontractor and partner of

choice for IJM Corp and UEM Builders. Its bauxite mining operation

was adversely affected by the mining ban imposed by the

government. Rising construction earnings partly offset the lower

mining earnings in 9MFY16. WZS’s FY15 PER of 14x is below the

small-cap construction peer average of 16x.

Core construction operation

WZS’s core operation is the provision of construction and engineering

services, specializing civil and onshore oil and gas (O&G) works. Its

management team has extensive experience in the industry and some

were senior managers/directors in Road Builder (merged with IJM Corp)

and PATI Sdn Bhd (construction arm of UEM Builders) previously. WZS

also manufactures steel components for the O&G and airline industries. Its

two associate companies (30-49% stake) are involved in bauxite mining.

Growing order book

The company expects the expansion of its construction order book to drive

earnings growth. Its order book increased to RM885m at end-FY16

compared to RM768m at end-FY15. Its current order book is RM933m,

equivalent to 3.5x FY15 revenue. It is bidding for works on the RM3.74bn

Setiawangsa-Pantai Expressway and RM4bn Central Spine Road project

(partnering UEM Builders). WZS is targeting new contract wins of at least

RM0.5bn to grow its order book to RM1.2bn by end-FY17.

Bauxite ban

WZS benefited from the bauxite mining boom in Pahang, which led to its

share of associate PAT rising to RM18.5m (82% of group PAT) in FY15

from RM4.5m in 16MFY14. Associate PAT fell 44% yoy to RM7.2m in

9MFY16 due to the ban on bauxite mining early this year. The ban was

extended to end-2016 but Approved Permits (AP) were granted to WZS to

export its stockpile and the company expects this be a benefit in 4QFY16.

Financials and valuation

WZS’s net profit fell 13% yoy to RM14.9m in 9MFY16 due to the fall in

associate income. Core construction and manufacturing PAT rose 78%

yoy to RM7.3m in 9MFY16 (50% of group PAT) to partially offset the

decline in associate PAT. Conservatively, the FY15 fully diluted PER is

18x, assuming full conversion of warrants expiring in 2024.

Earnings & Valuation Summary

FYE 31 Aug (RMm) 2011A 2012A 2013A 2014A* 2015A

Revenue 73.3 84.7 86.9 120.3 351.4

EBITDA 6.4 6.2 7.5 12.5 16.9

Pretax profit 1.6 1.3 2.8 11.5 26.7

Net profit 1.2 0.8 2.7 8.8 20.7

EPS (sen) 0.9 0.6 2.1 5.9 5.6

PER 107.3 160.8 47.4 22.8 17.8

Core net profit 1.2 0.7 6.3 11.4 20.9

Core EPS (sen) 0.9 0.6 4.9 7.1 5.7

Core EPS growth (%) NA (36.4) 763.7 17.1 25.0

Core PER 112.1 176.3 20.4 18.9 17.7

Net DPS (sen) - - - - 2.0

Dividend Yield (%) - - - - 2.0

EV/EBITDA 53.3 59.9 49.0 28.9 19.8

Chg in EPS (%) - - - - -

Affin/Consensus (x) - - - - - * Change in FY from 30 Apr to 31 Aug. 16 months ended 31 Aug 2014 result. PER annualized.

Source: Affin Hwang, company data

Company Note

WZ Satu WENG MK Sector: Construction

RM1.00 @ 18 October 2016

Not Rated

0.00

0.50

1.00

1.50

2.00

2.50

Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16

(RM)

Price Performance

1M 3M 12M Absolute -2.9% -2.0% -7.7% Rel to KLCI -3.8% -1.8% -5.0%

Stock Data

Issued shares (m) 340.4 Mkt cap (RMm)/(US$m) 340.4/81.2 Avg daily vol - 6mth (m) 0.2 52-wk range (RM) 0.85-1.43 Est free float 22.8% BV per share (RM) 0.86 P/BV (x) 1.2 Net cash/ (debt) (RMm) (3Q16) 16.3 ROE 7.2% Derivatives Nil Shariah Compliant Yes

Key Shareholders

Tengku Dato’ Sri Uzir 26.4% Tan Ching Kee 13.5% Ong Lee Veng 6.8% Lembaga Tabung Haji 6.7% Source: Affin, Bloomberg

Loong Chee Wei CFA (603) 2146 7548

[email protected]

Cassandra Ooi (603) 2146 7481

[email protected]

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Emerging premier contractor

Acquisitions to diversify operation

WZ Satu acquired WZS KenKeong Sdn Bhd (WZSK) in May 2014, which

is involved in construction, and Misi Setia Oil & Gas Sdn Bhd in October

2014, which is involved in onshore oil and gas construction. WZSK was

acquired. The acquisitions diversified the company’s operation from

manufacturing cold drawn bright steel polished shaft, which is facing rising

cost pressure and stagnant market demand.

Enhanced capabilities through acquisitions

By acquiring WZSK and Misi, the company built up its capabilities in

construction and engineering with the entry of key management personnel

with extensive experience in the industry. For example, Senior Executive

Director/Chief Operating Officer Dato’ IR William Tan, who was the

founder of WZSK, has 36 years of experience in the construction industry

and worked in the Public Works Department and Road Builder previously.

Relationship with Pahang state government

WZS’s Executive Chairman/CEO Tengku Dato’ Sri Uzir bin Tengku Dato’

Ubaidillah was an Executive Director of Tanah Makmur Bhd previously.

His close relationship with Tanah Makmur and the Pahang royalty led to

WZS venturing into bauxite mining through its 49%-owned associate SE

Satu Sdn Bhd and 30%-owned associate SE Satu Pelangi Sdn Bhd.

Fig 1: Directors’ profile

Name Designation Age Profile

YM Tengku Dato’ Sri Uzir Bin Tengku Dato’ Ubaidillah

Executive Chairman / Chief Executive Officer

56 Bachelor of Science (Honours) Degree in Civil Engineering in the City University

Started his career with Jabatan Kerja Raya as an engineer

Chief Executive Officer of Malaysian General Investment Corporation Berhad (now known as Sumatec Resources Berhad) from 1990 to 1993

Board of Road Builder (M) Holdings Berhad, Kurnia Setia Berhad and Project Penyelenggaran Lebuhraya Berhad

Executive Director of Tanah Makmur Berhad in 2011

Dato’ Ir. William Tan Chee Keong

Senior Executive Director / Chief Operating Officer

60 Bachelor of Science (Honours) in Civil Engineering in the University of Nottingham

A member of The Institution of Engineers Malaysia and registered Professional Engineer.

Started his career in Jabatan Kerja Raya and worked there from 1980 to 1984

Was a project manager in Ken Holdings Sdn Bhd and Dayapi Bhd

A Senior Project Manager (later Project Director) of Road Builder group of companies in 1992

Appointed as an Executive Director in Road Builder (M) Sdn Bhd

Founded WZS KenKeong Sdn Bhd in 2007 after he left the Road Builder group

Mr. Tan Teng Heng

Executive Director / Chief Financial Officer

51 A member of the The Malaysian Institute of Certified Public Accountants

Trained in the big four audit and consultancy firms

Prize winner in two professional subjects i.e. Financial Accounting and Management Accounting.

Was the CEO of an options and futures company which was then a member of KLOFFE (Kuala Lumpur Options and Financial Futures Exchange)

Was with HwangDBS Investment Bank Berhad as Senior Vice President.

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Mr. Tan Ching Kee

Senior Executive Director

56 Founder of WZ Satu Berhad (previously known as Weng Zheng Resources Berhad)

37 years of experience in the steel trading business

Brother of Mr. Tan Chong Boon, a Director of the Company and brother-in-law of Mr. Ng Chong Tin, an Alternate Director of the Company.

Mr. Tan Chong Boon,

Executive Director

50 Degree (Honours) in Civil Engineering in the Universiti Putra Malaysia (UPM)

Experience in the areas of designing and building civil and structural works

Established the Group’s cold drawn bright steel production plant in 1995 and later, he managed the Group’s venture into the production of high-end freecutting polished shafts for office automation

Dato’ Ir. Mohd Ghazali Bin Kamaruzaman,

Executive Director

50 A member of The Institution of Engineers, Malaysia and Board of Engineers, Malaysia

Bachelor’s degree in Civil Engineering from Victoria University of Technology, Melbourne

Master’s degree in Project Management from Universiti Teknologi Mara (UiTM)

More than 26 years of experience in civil engineering works

Design engineer with the Shire of Melton, Victoria Australia in 1988

Engineer in PATI Sdn Bhd and later PATI Pave Sdn Bhd

Notable projects - North South Expressway, Second Link, Central Link, Manila Cavite Expressway, Jalan Pahang, Lebuhraya Pantai Timur (LPT), PUTRA LRT, KL – Salak Expressway, Bangi Seremban Third Lane Widening and Simpang Pulai – Blue Valley.

Founded Prisma Simfoni Sdn Bhd in 2005 specialized in road construction, earthworks, building construction and waterworks

Notable projects - Third Lane Widening Tg. Malim to Slim River, Missing Link Awan Besar to KESAS Highway, UPSI infrastructure works, Batu Embun Water Intake and Treatment Plant, Herbal Centre Phase 2 for Technology Park Malaysia, Commercial & Office Building for UDA (North) in Seberang Prai and Non Revenue Water (NRW) for PAIP.

Dato’ Amin Rafie Bin Othman

Deputy Chairman / Senior Independent Non-Executive Director

56 Chairman of the Nomination Committee, Remuneration Committee and a member of the Audit Committee

A joint degree in Economics and International Politics in 1982

Master of Business Administration degree from the City University of London, United Kingdom.

Chairman of Asia Solar Generation Ventures Sdn Bhd

Managing Director of Plynlymon Capital Sdn Bhd and Rampai Ulltima Sdn Bhd

A Director of PDAC Formis Sdn Bhd (Brunei)

Past President of the Malaysian Association of Asset Managers

A member of the Listing Committee of Bursa Malaysia Securities Berhad.

Datuk Idris bin Haji Hashim

Independent Non-Executive Director

63 Diploma in Town and Regional Planning from Universiti Teknologi Mara (UiTM) in 1975

Master of Science, City and Regional Planning from Illinois Institute of Technology, Chicago in 1978.

Started his career as an assistant town planner with Arkitek Bersekutu Malaysia in 1975 articipated in projects such as Pusat Bandar Bukit Raden, Kompleks Perdagangan Kuantan in Pahang and Bangunan Sri Mara in Kuala Lumpur

Attached to North-Eastern Illinois Planning Commission, Chicago as a Planner where he was involved in various large projects in the State of Illinois as well as the New Jeddah International Airport, King Abdul Aziz University and Automotive Centre for Sears Roebuck & Co. He

Lecturer in the School of Architecture, Planning and Surveying of UiTM in 1980.

Director of Focus Point Holdings Berhad.

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Dato’ Syed Kamarulzaman Bin Dato’ Syed Zainol Khodki Shahabudin,


50 Master’s in Science and Corporate Communication from School of Modern Languages & Communication, Universiti Putra Malaysia (UPM)

Bachelor’s in Business Administration from School of Business, Royal Melbourne Institute of Technology (RMIT)

Diploma in Business Studies from Mara Institute of Technology

Chairman of the Shariah Advisory Committee

Managing Director of Perbadanan Nasional Berhad (PNS) since 1st December 2007

Member of PNS’s Directors Investment Committee.

Was previously the Managing Director of Yayasan Tekun Nasional

20 years of experience in banking with last attachment at Bank Muamalat Malaysia Berhad as a Branch Manager

Lecturer at Universiti Tenaga Nasional (UNITEN)

Dato’ Yeong Kok Hee,


55 A member of the Audit Committee, Remuneration Committee and Nomination Committee

Consultant of CSC Malaysia Sdn Bhd focused in the areas of Managed Services, Technology Consulting and Complex System Integration.

Established and developed a significant number of strategic relationships and alliances with the senior management of the financial and governmental sectors

Encik Rosli Bin Shafie


63 Chairman of the Audit Committee and a member of Remuneration Committee and Long Term Incentive Plan Committee

Advanced Diploma in Accountancy from ITM (presently known as UiTM)

A member of the Malaysian Institute of Accountants

Was appointed as the Chief Operating Officer/Director of PATI Sdn Bhd

Assumed the position of Chief Financial Officer for UEM Builders Bhd. He left UEM Builders Bhd upon attaining the mandatory retirement age in 2007

Was also appointed as Chief Financial Officer for Willis (Malaysia) Sdn Bhd, insurance brokers and consultants from January 2011 to February 2013

Mr. Ng Chong Tin,

Alternate Director to Mr. Tan Chong Boon

50 Embarked on his career in the steel industry in 1985 and join the Group in its early days as a co-founder and Director

32 years of experience in the development of sales and marketing strategies

In charge of the sales and marketing functions of the Group’s steel trading business.

Mr. Choi Chee Ken

Alternate Director to Dato’ Ir. Mohd Ghazali Bin Kamaruzaman

52 Bachelor’s degree in Civil Engineering from University of Ohio, USA

More than 21 years of working experience in the construction and building materials industries

Began his career as an Engineer in Associated Concrete Product Sdn Bhd in 1989

Consultant engineer in Sepakat Setia Perunding Sdn Bhd

Senior Project Manager in Road Builder (M) Sdn Bhd from 1996 to 2005 Source: Company

Acquisitions came with profit guarantees

WZSK was acquired for RM27.5m (PER of 5x based on guaranteed profit).

The acquisition of WZSK comes with profit guarantees of RM5.67m p.a. in

2015-2017. Misi was acquired for RM27m (PER of 7x based on

guaranteed profit) with purchase consideration paid partly in cash

(RM16.2m) and new WZS shares (RM10.8m). The acquisition of Misi

comes with profit guarantees of RM4m p.a. in 2015-2017. The profit

guarantees provide a floor on future earnings up to 2017.

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Fig 2: WZ Satu corporate structure

Source: Company

Growing order book

WZS is emerging as a preferred subcontractor for major

construction/infrastructure companies such as Gamuda, IJM Corp, UEM

Builders, Ekovest and Malaysian Resources Corp (MRCB). Some of the

subcontract work for major infrastructure projects that WZS was involved

in include Ipoh-Padang Besar Electrified Double Tracking Rail, Sungai

Besi Highway upgrading and access road for Ulu Jerai Hydroelectric

projects.

WZS’s construction order book has grown substantially over the past three

years. The current order book is RM933m, equivalent to 3.5x FY15

revenue. This represents a 257% increase from RM261m as at 31 August

2014. Management thinks the rising order book will support the company’s

construction and oil & gas segments. Construction operations contributes

RM752m or 81% of the total order book while oil and gas division

contributes the remaining RM181m or 19% of total order book.

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Fig 3: Total order book at end of each financial year

Source: Company; FY17E is company estimate

Mainly involved in highway and RAPID projects

The major construction projects in its order book currently are subcontract

packages for the West Coast Expressway (awarded by IJM Corp) and

Duta Ulu Kelang Expressway Phase 2 (awarded by Ekovest). The major

oil and gas projects are works for Petronas’s RAPID project in Johor.

Fig 4: Construction order book as at 31 August 2016

Source: Company

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Fig 5: Onshore oil and gas order book as at 31 August 2016

Source: Company

Bidding for DUKE Phase 3 and Central Spine Road projects

WZ Satu is bidding for works on the RM3.74bn Setiawangsa-Pantai

Expressway and RM4bn Central Spine Road project (partnering UEM

Builders). WZS is targeting new contract wins of at least RM0.5bn to grow

its order book to RM1.2bn by end-FY17. The upcoming Budget 2017 to be

announced on 21 October could see the government allocating funds for

further phases of the CSR project.

Main contractor in potential new projects

WZS expects its construction PBT margin of 4.7% in FY15 to improve in

the long run as it undertakes larger projects (gaining economies of scale)

and moves up the value chain to become the main contractor for potential

new projects. WZ Satu will likely be part of the consortium led by UEM

Builders for the CSR project and hence believes it can earn better profit

margins as a main contractor.

New rail link proposed

Prime Minister Datuk Seri Najib Razak unveiled a series of new initiatives

this week to modernise the country’s public transportation to help the

economy and improve connectivity for the people. Topping the list was the

new 600 km East Coast Rail Link (ECRL) from Kuala Lumpur to Tumpat,

Kelantan, via Kuantan, Kemaman and Kuala Terengganu (New Straits

Times).

The cost of the project is uncertain with some media sources indicating

that it could cost around RM60bn, which seems high. Based on the

RM38m cost per km of the completed Ipoh-Padang Besar Double Tracking

project, the 600 km ECRL could cost over RM23bn due to the

mountainous terrain that it passes through and construction

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costescalation. Announcing the ECRL strengthens the pipeline of

infrastructure projects for construction companies to potentially expand

their order books.

Potential beneficiary of East Coast Rail Link

WZS could be a beneficiary of the ECRL given its established track record,

being one of the subcontractors for the RM12.5bn Ipoh-Padang Besar

Double Tracking Rail project. The project was undertaken by a joint

venture between MMC Corp and Gamuda as the main contractor.

Bauxite reserves expected to last over three years

WZS ventured into bauxite mining through its 49%-owned associate SE

Satu Sdn Bhd and 30%-owned associate SE Satu Pelangi Sdn Bhd in

FY14. The mines are located in Bukit Goh, Pahang, with estimated

reserves of about 3.5 years.

Bauxite ban could be lifted

WZS benefited from the bauxite mining boom in Pahang, which led to its

share of associate PAT rising to RM18.5m (82% of group PAT) in FY15

from RM4.5m in 16MFY14. Associate PAT declined 44% yoy to RM7.2m

in 9MFY16 due to the ban on bauxite mining early this year. The ban has

been extended to end-2016 but Approved Permits (AP) were granted to

WZS to export its stock pile and the company expects this to be a benefit

in 4QFY16.

Bauxite demand remains strong from China

Bauxite demand remains strong from China following a rebound in

aluminium prices. The possible lifting of the ban on bauxite mining

activities in Pahang would benefit WZS.

Fig 6: London Metal Exchange Aluminium Cash Price (LOAHDY)

Source: Bloomberg

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Highway concession acquisition plan falls through

WZS has aggressive plans to expand into the highway infrastructure

concession business. It signed a Heads of Agreement (HOA) with SILK

Holdings Bhd for the proposed acquisition of the Kajang Traffic Dispersal

Ring Road concession for RM368m. The proposed price was larger than

the WZS’s market capitalisation. Negotiations were mutually terminated on

23 September 2016 as both parties were unable to reach a deal. WZS’s

management clarified that it had preferred the purchase consideration to

be partially settled in new shares to be issued by WZS but SILK had

preferred an all-cash deal.

Moving up the value chain in aircraft manufacturing

WZS also plans to expand its aircraft component manufacturing business

(high value added) and exit from the cold drawn bright steel polished shaft

manufacturing business (low value added). The company thinks this could

improve manufacturing profit margin in the long run. Currently, it is a Tier 3

aerospace company and is targeting to move up to Tier 2 next year by

investing in new state-of-the-art machines. WZS thinks high start-up costs

could dampen manufacturing earnings in the short term but there could be

long-term benefits if it is successful in moving up the value chain.

Financials and valuation

WZS’s net profit fell 13% yoy to RM14.9m in 9MFY16 due to the fall in

associate income. Core construction and manufacturing PAT rose 78%

yoy to RM7.3m in 9MFY16 (50% of group PAT) to partially offset the

decline in associate PAT. This led to the rising earnings contribution from

its core construction and manufacturing operation to 50% of group PAT in

9MFY16 from 18% of group PAT in FY15.

Fig 7: Group net profit breakdown

Source: Company

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Fig 8: Group net profit breakdown in percentage

Source: Company

WZS’s FY15 PER of 14x is below the small-cap construction peer average

of 16x. Conservatively, the FY15 fully diluted PER is 18x, assuming full

conversion of warrants expiring in 2024.WZS has net cash of RM16.3m or

RM0.05/share as at 31 May 2016, which should support the company’s

plan to gear up to expand via acquisitions if opportunities arise, as the

group has indicated it wants to do.

Fig 9: Peer comparison

Stock

Bbg

Rating

Shr price

Target price

Market Cap

PER (x)

EPS gr (%)

P/BV (x)

P/BV (x)

ROE (%)

DY (%)

(RM) (RM) (RMbn) CY15 CY15 CY15 CY15 CY15 CY15

Sunway Constr SCGB MK BUY 1.67 2.03 2.2 15.8 0.7 4.8 4.1 32.8 2.4

Eversendai EVSD MK BUY 0.47 0.67 0.4 6.1 458.6 0.3 0.4 5.9 1.1

Benalec BHB MK HOLD 0.39 0.53 0.3 24.9 (13.6) 0.6 0.5 2.3 0.4

Gabungan AQRS AQRS MK BUY 0.94 1.30 0.4 NA NA 1.1 1.0 (3.0) 0.0

WZ Satu WENG MK N-R 1.00 NA 0.3 13.9 25.0 1.0 1.2 7.2 NA

Wgt avg 16.5 (6.4) 3.5 3.0 22.7 1.8 Source: Affin Hwang estimates, Company; based on prices as of 18 October 2016

Key risks

The key risk for WZS is the government may extend the ban on bauxite

mining. There are also execution risks for its construction projects, eg,

rising labour and building material costs. WZS plans to invest in new

machines costing RM4m to move up to Tier 2 from Tier 3 currently in the

manufacture of aircraft components but this is subject to acceptance by the

airline industry.

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WZS – FINANCIAL SUMMARY Profit & Loss Statement Key Financial Ratios and Margins

FYE 31 Aug (RMm) 2012A 2013A 2014A* 2015A FYE 31 Aug (RMm) 2012A 2013A 2014A* 2015A

Revenue 84.7 86.9 160.4 351.4 Growth

Operating expenses (78.4) (79.4) (143.7) (334.5) Revenue (%) 15.6 2.7 38.4 192.1

EBITDA 6.2 7.5 16.7 16.9 EBITDA (%) (2.2) 20.1 66.9 34.8

Depreciation (3.5) (2.7) (3.7) (5.2) Core net profit (%) (36.7) 761.8 36.3 143.1

EBIT 2.8 4.8 13.0 11.6

Net interest income/(expense) (1.5) (2.0) (2.1) (3.4) Profitability

Associates' contribution - - 4.5 18.5 EBITDA margin (%) 7.4 8.6 10.4 4.8

EI 0.1 (3.6) 0.2 (0.1) PBT margin (%) 1.5 3.2 9.6 7.6

Pretax profit 1.3 2.8 15.4 26.7 Net profit margin (%) 0.9 3.1 7.3 5.9

Tax (0.5) (0.1) (1.8) (4.1) Effective tax rate (%) 37.0 3.3 11.5 15.3

Minority interest - - - 0.3 ROA (%) 0.7 2.3 4.1 4.6

Net profit 0.8 2.7 11.7 20.7 Core ROE (%) 1.0 8.7 6.1 8.4

ROCE (%) 0.7 2.6 4.7 6.4

Balance Sheet Statement Dividend payout ratio (%) - - - 28.1

FYE 31 Aug (RMm) 2012A 2013A 2014A* 2015A

Fixed assets 44.2 45.3 50.8 85.9 Liquidity

Other non-current assets 0.6 0.6 27.4 72.7 Current ratio (x) 1.7 1.8 2.1 1.6

Total non-current assets 44.8 45.8 78.3 158.6 Op. cash flow (RMm) (7.0) 6.9 (4.3) 2.0

Cash and equivalents 1.5 3.0 20.4 78.5 Free cashflow (RMm) (7.1) 7.4 (13.5) (20.1)

Inventory 46.3 41.2 44.7 30.4 FCF/share (sen) (2.1) 2.2 (4.0) (5.9)

Trade receivables 23.7 27.3 46.9 102.1

Other current assets 2.4 1.8 25.0 83.6 Asset management

Total current assets 73.9 73.3 137.0 294.6 Inventory turnover (days) 226.7 192.7 124.3 38.4

Trade payables 8.1 11.3 25.1 125.2 Receivables turnover (days) 102.1 114.7 106.7 106.0

Short term borrowings 34.0 28.3 35.5 59.4 Payables turnover (days) 39.6 52.8 69.9 158.2

Other current liabilities 1.5 1.8 5.3 4.0

Total current liabilities 43.5 41.3 65.8 188.6 Capital structure

Long term borrowings 1.7 2.2 6.4 13.2 Net gearing (x) 0.5 0.4 0.2 net cash

Other long term liabilities 3.4 3.3 2.0 2.0 Interest cover (x) 1.8 2.4 6.1 3.4

Total long term liabilities 5.1 5.5 8.4 15.2

Quarterly Profit & Loss

Shareholders' funds 70.1 72.4 141.1 249.3 FYE 31 Aug (RMm) 4QFY15 1QFY16 2QFY16 3QFY16

Revenue 113.0 102.9 114.0 125.5

Cash Flow Statement Operating expenses (111.0) (100.8) (109.7) (117.3)

FYE 31 Aug (RMm) 2012A 2013A 2014A* 2015A EBITDA 7.2 3.9 8.0 13.6

PAT 0.8 2.7 13.6 22.6 Depreciation (5.2) (1.9) (3.8) (5.4)

Depreciation & amortisation 3.5 2.7 3.7 5.2 EBIT 2.0 2.1 4.3 8.2

Working capital changes 61.9 57.2 66.4 7.2 Net int income/(expense) 1.7 (1.1) (0.3) 0.7

Others (73.2) (55.8) (88.0) (33.1) Associates' contribution 5.6 3.8 3.1 0.3

Cashflow from operations (7.0) 6.9 (4.3) 2.0 Exceptional items 0.2 (0.2) 0.0 -

Capex (0.1) (7.6) (9.2) (22.3) Pretax profit 7.6 4.3 5.8 7.2

Others (0.3) 8.1 (19.6) (8.1) Tax (1.4) (0.1) (1.2) (1.6)

Cash flow from investing (0.4) 0.5 (28.8) (30.5) Minority interest 0.3 0.2 0.3 (0.0)

Debt raised/(repaid) - - - - Net profit 6.5 4.4 4.9 5.6

Equity raised/(repaid) - - - - Core net profit 6.2 4.7 4.9 5.6

Dividends paid - - - -

Others (5.2) 5.5 (39.7) (76.0) Margins (%)

Cash flow from financing 5.2 (5.5) 39.7 76.0 EBITDA 6.4 3.8 7.0 10.8

PBT 6.7 4.2 5.1 5.8

Free Cash Flow (7.1) 7.4 (13.5) (20.1) Net profit 5.7 4.3 4.3 4.5

Source: Company

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Equity Rating Structure and Definitions

BUY Total return is expected to exceed +10% over a 12-month period

HOLD Total return is expected to be between -5% and +10% over a 12-month period

SELL Total return is expected to be below -5% over a 12-month period

NOT RATED Affin Hwang Investment Bank Berhad does not provide research coverage or rating for this company. Report is intended as information only and not as a

recommendation

The total expected return is defined as the percentage upside/downside to our target price plus the net dividend yield over the next 12 months.

OVERWEIGHT Industry, as defined by the analyst’s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months

NEUTRAL Industry, as defined by the analyst’s coverage universe, is expected to perform inline with the KLCI benchmark over the next 12 months

UNDERWEIGHT Industry, as defined by the analyst’s coverage universe is expected to under-perform the KLCI benchmark over the next 12 months

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wz satu€¦ · 19/10/2016 · founder of wz satu berhad (previously known as weng zheng resources...

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