not vested
TA Enterprise earnings above expectations, target price RM1
KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) is maintaining a Buy recommendation on TA Enterprise with a target price of RM1.
It said TAE’s net profit for the financial year ended Jan 31, 2014 (FY14)cwas above its expectation, lifted by write-back in taxes.
“Property development activities picked up; we expect the positive traction to continue,” it said in its research note.
HDBSVR said TAE’s FY14 net profit was 10% above estimates, lifted by lower taxes due to utilisation of unabsorbed tax losses and capital allowances. Profit before tax was in line.
“Property development revenue and profit tripled on-quarter due to progressive billings and construction of Damansara Avenue project. Hotel revenue remained steady but profit was dragged by forex losses and goodwill impairment.
“Stockbroking revenue was flat on-quarter but profit fell due to decrease in brokerage and proprietary trade income. Credit and lending segment was boosted by recoveries in the quarter,” it said.
The research house said while no dividend was declared in the quarter, but based on past trends, it expected TAE to declare a final DPS in May and it assumed a 30% payout.
“The lower effective tax rate in FY14 may not be sustainable and hence we have maintained our effective tax rate assumption at 25% at this juncture.
“Going forward, we expect earnings to be driven by property while hotel continues to bring in a steady income stream,” it said.
HDBSVR said construction on the two apartment blocks of The Gardens (a Canadian project in which it has a 65% stake), should be completed by the second half of 2014.
“On completion, we expect TAE to recognise the remaining 90% revenue of the sold units. Based on a blended take-up rate of 80% and C$85mil GDV, we estimate the project would contribute C$40mil to top line in FY15.
“Maintain Buy and RM1 sum-of-parts derived target price. The near term re-rating catalyst is a potential sale of TAE's broking unit while it unlocks the value of its property and hotel business over the medium term,” it said.
Source: The Star