TA Securities - Bursa e-Research

COMPANY UPDATE
TA Securities
A Member of the TA Group
Tuesday, January 21, 2014
FBMKLCI: 1,807.59
Sector: Technology
MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048
IRIS Corporation Berhad
TP: RM0.54(+25.6%)
Last traded: RM0.43
Development of 100ha Land in Solomon Islands
BUY
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*
TA Research Team Coverage
+603-2167-9603
paulyap@ta.com.my
ISLB obtains 51.0% stake in JRD
IRIS Land Sdn Bhd (subsidiary of ICB) subscribed to a rights issue of 10,408
shares, representing a 51.0% stake in JR Development Co Ltd (JRD). This will be
satisfied via a total consideration of SBD6.0mn (RM3.0mn). JRD is currently
dormant with proposed business activities of manufacturing, building and
construction.
Development of 100ha land in Solomon Islands
The subscription provides IRIS with the opportunity to participate in a project
to develop residential, commercial, retail and industrial units on a 100ha land
in Mamara, Honiara, Solomon Islands. Development of this project will utilise
the IRIS-KOTO IB system and requires working capital of up to RM25.0mn.
Based solely on the land cost, we are positive on the deal, as the consideration
of RM3.0mn is relatively inexpensive given the access to a 100ha of land. This
translates to a price of only RM0.55/sqft. We believe the stake was sold at a
discount due to the need for IRIS’s property development expertise and capital.
Currently, details on the project are scarce as it is still being planned. However,
based on previous news reports, we gather that the land will be used to
construct medium and high-end houses with a potential GDV of RM800mn.
Also, successful development of the first phase could potentially lead to a larger
plot of land in the vicinity.
Potential challenge in Take Up rates
The Mamara site consists of 1,160ha of beachfront land located approximately
7.0km west of Honiara, Solomon Islands. Solomon Islands has an estimated
population of 597k with a GDP per capita of USD3,300. This ranks their GDP per
capita at 174 out of 229 countries. Assuming the land is used to develop
medium and high end houses, we are concerned about the take up rate of these
houses by locals. That said, we note potential cost and time savings from houses
being constructed under the IRIS-KOTO IB System may boost affordability for
these individuals. Also, we do not discount the possibility of these homes being
marketed to foreigners as potential vacation homes, given the access to
internationally recognised scuba diving facilities and World War II remnants
around the area.
Share Information
Bloomberg Code
Stock Code
Listing
Share Cap (mn)
Market Cap (RMmn)
Par Value
52-wk Hi/Lo (RM)
12-mth Avg Daily Vol ('000 shrs)
Estimated Free Float (%)
Beta
Major Shareholders (%)
ICB MK
0010
ACE Market
1970.5
847.3
0.15
0.47/0.155
13114.3
55.1
0.88
FELDA - 26.7
Datuk Tan Say Jim - 11.0
Forecast Revision
Forecast Revision (%)
Net profit (RMm)
Consensus
TA's / Consensus (%)
Previous Rating
FY14
FY15
31.4
60.6
Buy (Maintained)
Financial Indicators
Net Debt/Equity (%)
CFPS (sen)
Price/CFPS (x)
ROE (%)
NTA/Share (RM)
Price/NTA (x)
FY14
45.7
(5.8)
nm
6.4
0.2
2.0
FY15
53.9
(3.3)
nm
10.1
0.2
1.8
Share Performance (%)
Price Change
1 mth
3 mth
6 mth
12 mth
IRIS
53.6
59.3
115.0
160.6
FBM KLCI
(3.2)
0.0
2.0
11.1
(12-Mth) Share Price relative to the FBM KLCI
Source: Bloomberg
Page 1 of 3
www.taonline.com.my
TA Securities
21-Jan-14
A Member of the TA Group
Figure 1 : Map of Honiara
Source: Google Maps, TA Securities
Figure 2 : Pictures of Mamara, Honiara, Solomon Islands
Source: Company, TA Securities
Source: Company, TA Securities
Changes to Earnings Estimates
Pending further information from management, we leave our forecasts unchanged at this
juncture. Our earnings forecast for FY14/FY15/FY16 remains at RM31.4mn/RM60.6mn
/RM74.9mn. This translates into an exciting FY15 and FY16 earnings growth of 93.0% and
23.6% respectively.
Recommendation
This project reiterates the group’s intent to foray into overseas property development. In
addition to this, ICB has projects in Papa New Guinea and potentially Angola and China.
While this is a relatively new business for them, we are confident in their capabilities of
implementing the projects due to their previous success in managing Rimbunan Kaseh and
Sentuhan Kasih. Maintain BUY on IRIS with a TP of RM0.54/share. This is based on a PER
ratio of 15x against CY15 EPS of 3.6sen. This translates into a total return of 26.6%. Key
buying/selling points for IRIS include: 1) Ability to provide solutions to key global concerns
such as poverty, pollution, food safety, employment and education; 2) Presence in 25
countries leading to favourable relationships with key government officials; 3) Synergies
from FELDA being its single largest shareholder and 4) Inability to carry out opportunities
presented.
Page 2 of 3
TA Securities
21-Jan-14
A Member of the TA Group
Financial Statements
Profit and Loss (RM'mn)
Revenue
COGS
Gross profit
2012*
483.8
(343.2)
140.6
2013
2014F
537.1
724.9
(430.8) (522.0)
106.3
203.0
2015F
1038.4
(747.6)
290.7
2016F
1101.9
(793.3)
308.5
EBITDA
Depreciation
EBIT
Finance cost
Associate
EI
PBT
Adj PBT
84.9
(12.6)
72.2
(14.1)
(2.2)
0.0
58.1
58.1
71.7
(23.8)
47.9
(13.3)
(0.7)
0.0
34.0
34.0
120.7
(33.0)
87.7
(18.0)
(0.7)
0.0
69.1
69.1
179.6
(41.1)
138.6
(21.1)
(0.7)
0.0
116.8
116.8
199.9
(42.9)
157.0
(13.0)
(0.7)
0.0
143.3
143.3
Tax
MI
Net profit
Adj net profit
EPS (sen)
DPS (sen)
(17.2)
2.8
43.7
43.7
2.9
0.5
(15.6)
2.6
21.1
21.1
1.1
0.5
(19.3)
(18.3)
31.4
31.4
1.6
0.5
(36.4)
(19.7)
60.6
60.6
3.1
0.5
(48.7)
(19.7)
74.9
74.9
3.8
0.5
Cash Flow (RM'mn)
PBT
Non- cash item
Chg in working capital
Tax
Others
CFO
2012*
58.1
16.4
21.7
(22.5)
36.9
110.6
2013
34.0
21.9
(44.6)
(16.5)
22.6
17.4
2014F
69.1
33.0
(163.5)
(19.3)
0.7
(80.2)
2015F
116.8
41.1
(137.8)
(36.4)
0.7
(15.7)
2016F
143.3
42.9
(42.0)
(48.7)
0.7
96.1
Capex
Others
CFI
(15.3)
(1.4)
(16.7)
(120.4)
20.7
(99.7)
(35.0)
0.0
(35.0)
(50.0)
0.0
(50.0)
(50.0)
0.0
(50.0)
Net Addition/Rpmt
Dividend Paid
Others
CFF
(27.9)
(7.1)
18.3
(16.7)
57.1
(8.9)
0.2
48.5
1.6
(8.9)
102.0
94.7
70.0
(8.9)
0.0
61.1
(50.0)
(8.9)
0.0
(58.9)
Key Assumptions (RM'mn)
New contract secured
---> Digital solution
---> Rimbunan Kaseh
---> Sentuhan Kasih
---> Felda 20k housing req
2012
2013
2014F
2015F
2016F
210
-
207
46
40
0
900
46
200
0
180
69
240
75
180
69
240
75
Balance Sheet (RM'mn)
Fixed Assets
Intangibles
Others
LT Assets
2012
117.1
135.4
60.8
313.3
2013
162.4
141.5
201.7
505.5
2014F
202.4
155.1
223.8
581.3
2015F
211.3
155.1
223.1
589.5
2016F
218.4
155.1
222.5
596.0
Inventories
Trade & other receivables
Cash & Cash equivalent
Others
ST Assets
57.4
277.2
88.8
49.8
473.2
94.6
333.9
58.9
99.1
586.4
149.3
472.6
39.7
101.7
763.3
204.8
569.0
35.1
101.7
910.6
220.4
603.8
22.4
101.7
948.2
Total Assets
786.6
1092.0
1344.6
1500.2
1544.2
Trade and other payables
ST Borrowings
Others
ST Liabilities
33.5
73.5
188.9
295.9
42.2
169.9
305.9
518.0
72.1
195.3
305.9
573.3
86.2
180.3
305.9
572.4
94.5
155.3
305.9
555.7
LT Borrowings
Others
LT Liabilities
75.7
13.2
89.0
102.8
13.9
116.8
106.0
17.6
123.6
191.0
17.6
208.6
166.0
17.6
183.6
MI
Share Cap
Reserves
Shareholder's Funds
(1.0)
236.3
166.4
402.7
41.1
236.5
179.6
416.1
75.4
295.6
276.7
572.3
95.1
295.6
328.5
624.1
114.8
295.6
394.5
690.1
Liabilities + Equities
786.6
1092.0
1344.6
1500.2
1544.2
Ratios
EPS Growth (%)
PER (x)
Div Yield (%)
Net cash (RMm)
Net gearing (x)
ROE (%)
ROA (%)
NTA (RM)
P/NTA (x)
EV/EBITDA (x)
2012#
17.6
19.3
1.0
(60.4)
0.2
9.3
4.8
0.17
2.7
9.1
2013
>100
42.1
1.0
(213.9)
0.5
5.1
2.2
0.17
2.6
12.9
2014F
49.2
28.2
1.0
(261.6)
0.5
6.4
2.6
0.21
2.1
9.5
2015F
92.9
14.6
1.0
(336.2)
0.5
10.1
4.3
0.24
1.9
6.8
2016F
23.5
11.8
1.0
(298.9)
0.4
11.4
4.9
0.27
1.7
5.9
* 15 months contribution
# Based on annualised 12-month earnings
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness are not guaranteed and opinions are
subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any
direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies
mentioned herein.
This report has been prepared by TA SECURITIES HOLDINGS BERHAD for purposes of CMDF-Bursa Research Scheme ("CBRS") administered by Bursa Malaysia Berhad and
will be compensated to undertake the scheme. TA SECURITIES HOLDINGS BERHAD has produced this report independent of any influence from the 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
for TA SECURITIES HOLDINGS BERHAD(14948-M)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
Kaladher Govindan – Head of Research
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