Fajarbaru Builder Group Bhd. :7047-MY: Earnings Analysis: 2017 By the Numbers : September 13, 2017

Fajarbaru Builder Group Bhd. reports financial results for the year ended June 30, 2017.

We analyze the earnings along side the following peers of Fajarbaru Builder Group Bhd. – KSH Holdings Limited and Lebtech Bhd. (ER0-SG and 9628-MY) that have also reported for this period.

Highlights

  • Gross margins widened from 15.33% to 31.03% compared to the same period last year, operating (EBITDA) margins now 24.69% from 12.09%.
  • Year-on-year change in operating cash flow of 1,282.05% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017 2016 2015 2014 2013
Relevant Numbers (Annual)
Revenues 453.32 423.91 387.53 313.58 213.2
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 38.79 10.74 -2.59 3.03 4.18
Earnings Growth (YOY) 261.1 514.3 -185.67 -27.52 119.62
Net Margin 8.56 2.53 -0.67 0.97 1.96
EPS 0.08 0.03 -0.01 0.01 0.02
Return on Equity 13.5 4.62 -1.4 1.98 2.99
Return on Assets 7.4 2.16 -0.62 0.91 1.54

Access our Ratings and Scores for Fajarbaru Builder Group Bhd.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 15.33% to 31.03% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 12.09% to 24.69% compared to the same period last year. For comparison, gross margins were 15.33% and EBITDA margins were 12.09% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

7047-MY‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 182.49, compared to last year’s level of 158.30 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

7047-MY‘s change in operating cash flow of 1,282.05% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 11.73% to 24.27% and (2) one-time items. The company’s pretax margins are now 23.66% compared to 11.56% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Fajarbaru Builder Group Bhd.

Company Profile

Fajarbaru Builder Group Bhd. is an investment holding company, which engages in the provision of management services. It operates through following business segments: Investment Holding, Property Development, Construction, Trading, Logging and Trading of Timber, and Services. The Investment Holding segment offers group-level corporate services. The Property Development segment develops commercial and residential properties. The Construction segment involves as general contractor in the construction industry. The Trading segment trades construction materials. The Logging and Trading of Timber segment extracts and trades timber. The Services segment provides logistic and transportation services. The company was founded on November 16, 1993 and is headquartered in Petaling Jaya, Malaysia.

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