King Wan

King Wan: In-line with consensus estimates, 4QFY13 net profit increased to $2.9m compared to a loss of $0.7m a year ago. This brings full year earnings to $6.1m (-10%) due to lower gross profits from its mechanical and electrical (M&E) engineering contracts, lower contributions from its associates, and one-off gains on disposal of investment property the previous year. Revenues of $29.6m for 4QFY13 jumped 123% y/y, mainly due to the higher revenue recognition on its M&E engineering contracts. Full year revenues improved 16% to $66.3m on the overall increase in value of works in progress. Gross profit margins for FY13 might be a concern with 4QFY13 margin of 9.9% dragging the full year’s margin down to 17.1%. This is compared to 16.5% and 23.8% achieved in 4QFY12 and FY12 margins respectively. The decline was due to the completion of a few contracts with better margins in 4QFY12. Orderbook remains strong with M&E engineering contracts worth $166.6m, to be completed over 2013-16. On its entire sale of stakes in King Wan's two Thai associates to KTIS for THB1.2b (S$50.2m), 5% of the consideration would be by way of cash and the remaining 95% shall be by way of shares in KTIS when KTIS has been successfully listed on the Stock Exchange of Thailand (SET). The share sale agreement has been extended to 25 Sep 2013 (extension of 3 months), which allows each party to exercise its option to recover the consideration paid/ shareholdings sold, in the event that listed KTIS shares are not allotted to the group. Barring unforeseen circumstances, the listing of KTIS shares is expected to be in July 2013. The final DPS of 1¢ brings full year to 1.5¢, which translates to a 4.5% yield on a 74% payout ratio based on last close of $0.33. Consensus 12-month estimate TP of $0.40 implies a 21% upside.