PETALING JAYA: Taliworks Corp Bhd may register a stronger set of financial results in the second half of financial year 2021 (FY21), says RHB Research.

       This is due to the group’s robust businesses, namely, water treatment, the supply and distribution segment, and waste management associate company.

       The research house said, “We note that Taliworks had in July received a RM43.5mil cash compensation from the government, for the non-increase in 2020’s scheduled toll hikes for the Cheras-Kajang highway.”

       It also said both its highways should see a recovery in daily traffic following the easing of lockdowns.

       “We deem the second-quarter results as broadly in line, as we expect a stronger second half, supported by higher contribution from its highway assets,” said RHB Research in its latest eport.

       It has maintained a “buy” call on the stock with a target price of 94 sen based on a sum-of-parts valuation with about an 8% financial year 2022 forecast (FY22) yield.

       “We still like the stock for its defensive earnings base, stable growth outlook, and an attractive forecast FY21 yield of 8%.

       “A 1.65 sen second interim dividend was declared for the quarter, bringing the first half’s dividends to 3.3 sen, which is in line with our expectations,” added RHB Research.

       RHB Research also noted that potential contributions from Taliworks’ recently acquired solar assets were not yet reflected in its forecasts, pending the deal’s completion.

       It added that Taliworks was trading at a 10.6 times forecast FY22 enterprise value to earnings before interest, taxes, depreciation, and amortisation.

       It noted that these valuations were attractive, given the high dividend yield of 8% at the moment.

       Taliworks’ downside risks include the unfavourable tariff revision outcomes, a broad-based economic slowdown, deteriorating asset quality that gives rise to higher operating costs, and escalating waste management costs that could drag it into losses, it said.