Investment Highlights

• We maintain BUY call on Vestland with a higher fair value of RM0.70/share (from RM0.62/share previously) by raising our FY24F/FY25F/FY26F earnings by +9.2%/+12.8%/+5.0% on its latest job win.

• Our revised FV, implies an upside potential of 55%, is based on an unchanged FY25F PE of 9x - the average for small- cap construction companies, plus a 3% premium for its superior 4-star ESG rating.

• Vestland announced that it has won a civil construction works job worth RM195mil for site clearance, earthworks, drainage, pavement and road furniture works for the Kota Bahru-to-Kuala Krai Expressway in Kelantan.

• This contract is a positive surprise, as it is not in its tender book.

• Works will start 19 July 2024 with expected completion in 2026 over 24 months.

• With this project in hand, the total job wins for the year is RM525mil, halfway to its annual target of RM1bil. The order book is now RM2.2bil, by our estimates.

• Vestland typically makes 10%-13% gross margin for civil works. For this project, we assume a GP margin of 12%.

• Vestland is currently trading at only 6x FY25F P/E, which is a deep discount to its peers that are trading at 8x-28x.

Source: AmInvest Research - 10 Jul 2024