Taliworks still a 'buy' despite lower earnings

PETALING JAYA: HLIB Research has maintained its “buy” call on Taliworks Corp Bhd with a slightly higher target price of RM1.77, from RM1.76, despite Taliworks posting lower earnings in the second quarter ended June 30, 2017.
“The settlement of Selangor’s water sector restructuring has never been closer and we believe this will be the key rerating catalyst. Besides, there is also a potential upside from the issuance of a special dividend should the deal push through,” the research house said in a report yesterday.
It imposed a 30% discount on trade receivables owing by Syarikat Pengeluar Air Selangor Sdn Bhd (Splash) after taking into account the uncertain timing of the water restructuring exercise.
Taliworks’ net profit for the second quarter ended June 30, 2017 plunged to RM6 million from RM76.19 million a year ago in the absence of a RM64.526 million disposal gain.
Profit before tax was 47% lower at RM10.3 million, on provisions of RM10.9 million for payments due from Splash affected by the delay in the Selangor water restructuring exercise, higher amortisation cost of RM7.6 million and higher operating costs in both the water treatment operations.
Its revenue rose 18.8% to RM91.28 million compared with RM76.83 million achieved a year ago, after the impact from the provision for discounting.
HLIB Research said the first-half results were deemed within expectation as contribution from the construction segment is expect to normalise in subsequent quarters.
"Taliworks reported 1HFY17 gross revenue of RM162.6 million (+7% yoy), which translated to core net profit of RM41.4 million (+8% yoy), accounting for 53.9% and 48% of HLIB and consensus FY forecasts, respectively".
HLIB Research said risks include further delays in the Selangor’s water restructuring.
Taliworks' share price was down one sen to close at RM1.46 on 380,300 shares done yesterday. It has a market capitalisation of RM1.77 billion.