MERCURY SECURITIES
SDN BHD (113193-W)
(A Participating Organisation of Bursa Malaysia
Securities Berhad)
25 Feb 2016
RESULTS REPORTS
Handal Resources
Berhad
Market Price:
RM0.310
Market Capitalisation:
RM48.8mil
Board:
Main Market
Recommendation:
HOLD
Sector:
Trading / Services
Target Price:
RM0.31
Stock Code/Name:
7253 / HANDAL
Key Stock Statistics
2016E
Earnings/Share (sen)
P/E Ratio (x)
Dividend/Share (sen)
NTA/Share (RM)
Book Value/Share (RM)
Issued Capital (mil shares)
52-weeks High (RM)
52-weeks Low (RM)
3.64
8.52
0.63
0.71
160.0
0.27
0.41
Major Shareholders:
.Dato' Mohsin Abdul Halim
.Zahari bin Hamzah
.Joel Emanuel Heaney
.Mallek Rizal bin Mohsin
.OSK Capital Partners S/B
% (est)
15.8
9.3
6.5
5.8
5.6
PERFORMANCE – 4Q/FY15
3Q / 30 Sept
Rev (RMm)
EBIT (RMm)
NPAT^(RMm)
EPS (sen)
yoy %
3Q15
qoq%
49.9
5.9
2.6
1.7
(17.7)
3.7
7.9
7.8
22.9
1.7
0.0
0.0
79.3
251.5
6,621.4
5,866.7
“Q4 – Revenue lower, profit margin marginally
higher”
2013A
2014A
2015A
2016E
Year end: Dec 31
Revenue
Operating Profit
Depreciation
Interest Expenses
Profit before Tax (PBT)
Effective Tax Rate (%)
Net Profit after Tax & MI
Operating Margin (%)
PBT Margin (%)
NPATMI Margin (%)
100.7
12.1
-3.1
-2.5
6.5
72.1
1.9
12.0
6.5
1.9
123.8
18.1
-3.6
-2.5
12.0
48.3
6.2
14.6
9.7
5.0
114.6
17.0
-3.2
-2.4
11.4
48.3
5.9
14.9
10.0
5.1
107.8
16.9
-3.2
-2.4
11.3
48.3
5.8
15.7
10.5
5.4
2013A
2014A
2015A
2016E
0.63
1.23
37.9
0.8
1.9
0.4
0.67
3.93
15.1
0.6
5.8
0.4
0.70
3.74
8.6
0.5
5.2
0.4
0.74
3.64
8.5
0.4
4.9
0.4
Book Value/Share (RM)
Earnings/Share (sen)
Dividend/Share (sen)
Div. Payout Ratio (%)
P/E Ratio (x)
P/Book Value (x)
Dividend Yield (%)
ROE (%)
Net Gearing (or Cash)(x)
4Q14
41.1
6.1
2.8
1.8
^NPATMI
P&L Analysis (RM mil)
Ratios Analysis
4Q15
We maintain our Hold Call with a target price of
RM0.31. Handal’s 4Q15 revenue fell to RM41.1mil,
down 17.7% from RM49.9mil due to the
challenging market conditions however registered
marginally higher profit before tax of RM5.41mil
as compare to RM5.36mil in the preceding year
corresponding quarter. On yearly basis, the group
registered marginally lower revenue and profit
nevertheless it meets our estimates.
“Integrated Crane Services (ICS)
higher with better GP”
revenue
ICS, the key revenue contributor increase from
RM29.2mil to RM32.8mil while gross profit
margin improved marginally to 36% from 35% due
to an increase in operational efficiency.
Cranes Fabrication business segment booked
RM5.2mil sales compared to RM13.1mil however
profit margin improved substantially from 34% to
42% in same quarter last year. On yearly basis, the
revenue increased from RM16.7mil to RM20.7mil
All information, views and advice are given in good faith but without legal responsibility. Mercury Securities Sdn. Bhd. or companies or individuals connected with it may have used research
material before publication and may have positions in or may be materially interested in any stocks in the markets mentioned.
This report has been prepared by Mercury Securities Sdn Bhd for purposes of CMDF-Bursa Research Scheme ("CBRS") administered by Bursa Malaysia Berhad and has been compensated to
undertake the scheme. Mercury Securities Sdn Bhd has produced this report independent of any influence from CBRS or the subject company. For more information about CBRS and other
research reports, please visit Bursa Malaysia’s website at: http://www.bursamalaysia.com/market/listed-companies/research-repository/research-reports/
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MERCURY SECURITIES SDN BHD
(113193-W)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
with better profit margin of 40% compare to 32% “Maintain Hold Call”
last year.
We maintain our Hold recommendation with FYWorkover Project Business segment revenue had end Target Price (TP) of RM0.31 based on
reduced from RM2.76mil to RM2.35mil due to a estimated P/E of 8.5 times of Handal’s lower
decrease in business activity with lower profit FY16 earnings/share which reflects a P/BV of
margin of 72% from 79%.
0.50 times of its FY16 NTA/Share. The main risk
factors for Handal is further delays in E&P capital
Supply, fabrication & Servicing industrial expenditure by oil majors (such as Petronas), slow
equipment & tank’s revenue decreased from implementation pace of major Oil/Gas/Energy
RM4.39mil to RM0.73mil with lower gross profit EPPs, higher steel costs for crane fabrication,
margin of 9% compared to 23%.
foreign exchange fluctuations and also stiff
competition with major international rival O&G
companies.
OUTLOOK/CORP. UPDATES
Handal’s management expect market conditions
remains challenging for the current financial year
amidst depressed crude oil price however the Group
expect to sustain its performance in view of the
nature of business activities in a niche market as
well as its existing long term contracts.
1-YEAR HISTORICAL SHARE PRICE
“WTI crude oil futures – Hover around US$30”
The oil price outlook remains bearish and this
doesn’t bode well with Handal. In medium term,
Handal seems not much affected from capex cuts
given its long term maintenance service contracts
and healthy balance sheet and cash flow however
we remains cautious on the oil & gas sector.
Source: Bloomberg
VALUATION/CONCLUSION
Handal (-11.4% YTD) has underperformed the
KLCI (-2.0% YTD) in 2016. Handal’s stock price
has been trading in the range of RM0.270RM0.410. Since oil peaked in Jun 2014, the
sentiments turned and remain bearish. Handal
relatively smaller market-cap and thin trading
volume put further pressure on its market visibility
compared to its peers.
All information, views and advice are given in good faith but without legal responsibility. Mercury Securities Sdn. Bhd. or companies or individuals connected with it may have used research
material before publication and may have positions in or may be materially interested in any stocks in the markets mentioned.
This report has been prepared by Mercury Securities Sdn Bhd for purposes of CMDF-Bursa Research Scheme ("CBRS") administered by Bursa Malaysia Berhad and has been compensated to
undertake the scheme. Mercury Securities Sdn Bhd has produced this report independent of any influence from CBRS or the subject company. For more information about CBRS and other
research reports, please visit Bursa Malaysia’s website at: http://www.bursamalaysia.com/market/listed-companies/research-repository/research-reports/
Page | 2