Taliworks’ 3Q earnings beat analysts’ expectations

The group’s net profit grew 156% YoY to RM41.4m on higher contribution from its toll division


TALIWORKS Corp Bhd’s earnings for the third quarter ended Sept 30, 2021 (3Q21), has surpassed analysts’ expectations, as the group’s net profit grew 156% year-on-year (YoY) to RM41.36 million on higher contribution from its toll division.

The infrastructure group, which is involved in water treatment, supply and distribution, highway and toll management, waste management and construction and engineering, posted a revenue of RM102.31 million for the quarter.

RHB Investment Bank Bhd analyst Eddy Do Wey Qing has maintained a ‘Buy’ call on Taliworks with a higher target price (TP) of 98 sen from 94 sen previously, as the company’s results beat the investment bank’s expectations.

He added that Taliworks had announced a third interim single-tier dividend of 1.65 sen per ordinary share for the quarter which was in line with RHB’s expectations.

In the financial year 2021 (FY21), Taliworks has to-date declared a total dividend payout of 4.95 sen per share, translating to RM99.8 million.

“Moving forward, we expect average daily traffic for both its toll roads to improve, supporting earnings recovery and robust earnings contribution from its water and waste segment.

“We like the stock for its defensive earnings base and attractive circa 8% FY21 forecast (FY21F) yield,” he wrote in a report on the company yesterday.

For the first nine months of 2021 (9M21), Taliworks’ net profit rose 51.4% to RM66.31 million, as toll compensation of RM43.5 million was received by its subsidiary Grand Saga Sdn Bhd from the government for the non-increase in scheduled toll hike in 2020.

Revenue for the period, however, dropped 5% to RM229.85 million, due to lower revenue from the water treatment, supply and distribution segment.

RHB has raised Taliworks’ FY21F, FY22F and FY23F earnings by 30%, 11% and 13%, respectively.

Do added that the group’s FY21F earnings contribution was lifted based on both toll roads and lower effective tax rate closer to 9M21.

He imputed higher FY21 to FY23F share of profits from the waste management associate.

Moving forward, Do said an unfavourable outcome on tariff revisions, a broad-based economic slowdown, deteriorating asset quality giving rise to higher operating costs and escalating waste management costs could be the downside risks to its call on the group.

Hong Leong Investment Bank Bhd (HLIB) analyst Edwin Woo has maintained a ‘Buy’ call on Taliworks with an unchanged standard operating procedures-driven TP of 96 sen.

He noted that Taliworks’ defensive source of earnings should anchor its healthy sustainable yields of 8% for FY21 to FY22.

“We continue to like Taliworks for its consistent earnings delivery amid pandemic uncertainties bolstered by an attractive dividend profile,” he said in a note yesterday.

Nevertheless, Woo said among the key downside risk for the group includes higher risk-free rates and return of restrictions.

He added that the group’s 9M21 core profit after tax after minority interest (PATAMI) of RM66 million beat the research house’s and consensus expectations at 126% and 113% of forecasts due to lumpy deferred income recognition.

He noted that the dividend per share of 1.65 sen in the quarter was in-line with expectations, in which Taliworks continues to deliver an attractive dividend yield of 8%.

“The water segment should continue to churn steady numbers while we expect toll traffic recovery along with the National Recovery Plan,” he said.

HLIB had raised Taliwords’ FY21 to FY23 forecasts by 7% to 54%, with a possible upside to forecasts that could come from its new water construction work.