KUALA LUMPUR: Hong Leong Investment Bank Bhd's (HLIB Research) reckons that Taliworks Corp Bhd could start experiencing stronger sequential progress with its Rasau projects.
The investment bank also noted that the company's results align with its and consensus expectations, reaching 67 per cent of full-year forecasts.
Taliworks reported third quarter ended Sept 30, 2023 (3Q23) results with revenue of RM90.7 million and core profit after taxation and minority interests (PATAMI) of RM13.5 million.
This brings the company's nine-month period ended Sept 30, 2023 (9MFY23) core PATAMI to RM35.4 million, increasing by 3.7 per cent versus the same period last year.
Additionally, HLIB Research also said the company's dividend per share of 1.65 sen was also in line.
As such, the investment bank has maintained its "hold" call on Taliworks with an unchanged sum of parts (SOP)-driven target price of RM0.82 post-earnings adjustments.
"Taliworks's defensive source of earnings should anchor its dividend yield of 7.7 per cent," it said in its research note.
On a segmental basis, the company's construction revenue declined 3.3 per cent mainly due to the weak first half of the financial year 2023 (1HFY23).
Nevertheless, construction revenue has doubled quarter-on-quarter (QoQ) due to progress from its Rasau packages.
"We expect to see stronger performance from this division, with projects showing signs of ramping up," HLIB Research said.
Meanwhile, Taliworks's water segment revenue climbed by 8.7 per cent driven by the increase in chemical and electricity rebates.
There was also a 2.4 per cent in bulk water supply rate (BWSR) rates in FY23, and million litres per day (MLD) came in lower by 2.5 per cent which is within HLIB Research's range of expectations of 973 MLD.
"At the operating profit level, there was a decline of five per cent mainly due to higher rehab and maintenance expenses incurred in 9MFY23.
"Profitability for the segment is expected to improve with a 14.3 per cent tariff hike due in 2024," it noted.
For its tolls segment, average daily traffic (ADTO) at the Grand Saga Highway and Grand Sepadu showed encouraging year-on-year (YoY) growth at eight per cent and two per cent respectively, benefiting from increased car usage versus 9MFY22 which encompassed periods of pre-endemic conditions.
Additionally, Grand Saga was aided by the opening of the SUKE highway.
Despite the ADT growth in the period, profitability was lower on the back of higher amortisation charges and higher rehab and maintenance charges.