KUALA LUMPUR (June 15): Hong Leong Investment Bank Research (HLIB) has maintained its 'buy' rating on Rohas Tecnic Bhd at 44 sen with a lower target price (TP) of 50 sen (from 51 sen previously).

In a note today, the research house said the infrastructure engineering firm reported 1QFY20 results with revenue of RM109.8 million (down 17% quarter-on-quarter [q-o-q], up 17% year-on-year [y-o-y]), and the core earnings of RM1.6 million (down 80% q-o-q, down 40% y-o-y) accounted for 7% of its full year forecast which fell short of expectations mainly due to the movement control order (MCO) in Malaysia.

HLIB said no dividends per share were declared during the quarter (against 1QFY19: nil).

In addition, the results shortfall came from a combination of slow site handover (fixed overheads and mobilisation costs were incurred) as well as stop work due to the MCO which impacted its Malaysian engineering, procurement, construction and commissioning (EPCC) segment.

"We gather the sites are currently finalising the terms with handover expected by end of 2QFY20," it said.

It added the current orderbook for the EPCC segment stands at circa RM580 million, which translates into 1.7 times cover ratio of FY19 EPCC revenue. Tower fabrication orderbook stands at about circa RM170 million, representing 1.3 times cover ratio on FY19 tower fabrication revenue. 

"Given the usual contract duration of both segments (18-36 months), the orderbook level looks healthy.

"Tenderbook remains at RM1 billion underpinned by its Penang transmission job, inevitably due to the MCO," it said.

Apart from that, it understands that Rohas will tender for extension to its current Laos EPCC contract with a similar contract value.

HLIB said it cut Rohas Tecnic's FY20/21/22 earnings by 22.9%/3.3%/3.1% after factoring in progress delays and lower productivity due to standard operating procedure measures.

The research noted it reckons due to the nature of its business, earning recovery trajectory post-MCO is likely to be relatively steeper to be underpinned by its substantial contract wins in Bangladesh recently.

At 9:50am, Rohas' share price dropped 2.25% or one sen to 44 sen with a market capitalisation of RM201.33 million.