#Hot Stock* Benalec falls 5% on 4Q loss, downgrade

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KUALA LUMPUR (Aug 26): Benalec Holdings Bhd shed five sen or 5% to 93 sen after the builder sank into losses in the fourth quarter ended June 30, 2014 (4QFY14).

Benalec, which fell to a low of 91.5 sen was traded at 93 sen at 11.38am. Some 12.74 million units changed hands.

Yesterday, Benalec said it posted a net loss of RM15.63 million in 4QFY14 against a net profit of RM4.04 million in the previous corresponding quarter. Net profit for the full year declined to RM7.21 million from RM56.75 million a year earlier.

The weaker results have prompted analysts to downgrade Benalec. Today, AmResearch Sdn Bhd lowered its fair value for Benalec shares to RM1.25 from RM1.31 while maintaining its "buy" call for the stock.

"We adjusted our fair value due to the lower target price-earning ratio (PE) multiple assigned to its construction earnings from 12 times to 8 times, higher discount rate assigned to its vessel charter from 8% to 12% and more moderate margin assumptions," the bank said in a note to clients today.

"This reflects the continued delays in the commercialisation of its Johor land concession as the operating environment remains fairly challenging. To our surprise, the group has yet to declare any dividend for FY14," AmResearch said.

On the bright side, AmResearch said Benalec's contract momentum continued to be on an upturn as it was set to receive RM360 million from three land sales. The sale and purchase agreements (SPAs) are expected to be recognised over the next three years.

"On top of that, Benalec managed to snag another repeat contract in Malacca worth RM204 million from the Oriental Group last May, where the payments are in cash.

"Similarly, the group appears to be ramping up efforts to secure more land sales in Malacca while eyeing more reclamation concessions within the state," AmResearch said.

Ambank said Benalec's re-rating potential hinged largely on its ability to monetise the deep development potential of its Johor concessions.

"All eyes will be on its protracted negotiations with 1MY Strategic Oil Terminal Sdn Bhd, which will lapse on December 11, this year, following three rounds of extensions," it said.