HLBank Research Highlights

Author: HLInvest   |   Latest post: Fri, 21 Feb 2020, 9:21 AM


Rohas Tecnic - Job win in Vietnam

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Rohas Announced That It Had Been Awarded An EPCC Contract by Phu My Vinh Construction Worth RM58.4m. This Brings Its EPCC Orderbook to C.RM430m Which Translates to a Decent 1.9x Cover on FY18 EPCC Revenue. Its Outstanding Tower Fabrication Orderbook Stands at C.RM200m Translating to 1.1x Cover on FY18 Tower Fabrication Revenue. In Total, the Company Has An Outstanding Tenderbook of C.RM1b. Maintain Our Forecasts and BUY Rating With An Unchanged TP of RM0.79. TP Is Pegged to 12x P/E Multiple Based on FY20 Earnings.


Starting right. Rohas announced that it had been awarded an EPCC contract by Phu My Vinh Construction worth RM58.4m for Phase 2 of Hoa Khanh Tay Water Supply System. The scope of work includes design and installation of transmission main and secondary pipelines as well as expansion of water treatment plant capacity from 40MLD to 80MLD. The contract spans a period of 24 months.


Within expectations. The company has previously guided for a job award in relation to the expansion of the water treatment plant. This brings its EPCC orderbook to c.RM430m which translates to a decent 1.9x cover on FY18 EPCC revenue. Its outstanding tower fabrication orderbook stands at c.RM200m translating to 1.1x cover on FY18 tower fabrication revenue.

Potential awards. Rohas has submitted tender for a transmission line from Butterworth to Penang Island which will run parallel to the Penang Bridge (estimated project value: RM1bn). There are 5 bidders: from China, India, Australia, Rohas Muhibbah and MMC-MRCB. The JV structure between Rohas and Muhibbah has not been fixed but will likely be based on job scope breakdown (civil marine works will be >50% of project value). Having undertaken the widening of Penang Bridge before, we reckon Muhibbah is a good partner for Rohas (which will then undertake the transmission line portion of works). Based on management's past guidance, an award outcome is likely in 1Q20. Apart from that we understand that Rohas will tender for phase 2 extension to its current Laos EPCC contract with a similar contract value tp phase 1. Overall, the company currently has an outstanding tenderbook of jobs close to RM1b.

Associates turnaround. Rohas 49%-owned mini-hydropower plant in Indonesia is expected to start contributing in FY20, a delay from 2Q19 due to unusual raining reason. Management guides that the earnings contribution to Rohas is expected to be c.RM4m annually. We understand its loss-making Vietnamese associate is likely to turn profitable this year as earlier approved water rate hikes is implemented.

Forecast. Maintain our forecasts as the contract win is within our expectations.

Maintain BUY, TP: RM0.79. Maintain our BUY rating and TP of RM0.79. We reckon with the completion of its legacy contracts, earnings should grow moving forward driven by better margins at HGPT, new EPCC jobs and stronger tower orders. TP is pegged to 12x P/E multiple based on FY20 earnings.


Source: Hong Leong Investment Bank Research - 22 Jan 2020

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