Benalec has further extended the period of validity for the term sheet for the signing of the Tanjung Piai land reclamation deal for an additional duration of six months from June-14 to finalise the terms and conditions. The extended duration shall come into effect from 12 June 2014 until 11 December 2014. (BMSB)
We are not surprised of this further delay given the lack of major progress made in the earlier part of this year. This is a negative development, which represents the third delay since 2013. We suspect that the major hurdle continues to be the environmental impact assessment (EIA) approval, and commitment from the main client. Nevertheless, we understand that full submission of the EIA is to be made soon.
Source: CIMB Daybreak - 13 June 2014
EPS has dropped 34% to 7.07 sen compared to year 2012. Current assets have increased 24.3% to RM933.6mil, but it was because increase of inventories & receivables.
The highlight of Benalec was because the type of business involved was unique which was land reclamation. Yet, further delay was really a bad news for Benalec to be re-rated.
By some rough calculation, as before the reclamation project has a profit margin of 15~20%. Revenue of RM200mil can yields RM30mil of gross profit. 2 years consisting 8 quarters, so Benalec has RM3.75mil of gross profit evenly each quarter, or RM15mil gross profit annually (about 21.7% of 2013 profit).
This project's contribution was not strong enough. Benalec disposed Melaka reclamation land and it's receivables reached new high about RM600mil. It expected to retrieve the amount by four financial years. RM150mil each year! That was too good to be true, but in premise, Benalec has to be good in dealing with debtors.
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