• JAKS is primed for charting new heights, supported by the diversification into the long-term recurring income from the power generation concession in Vietnam, coupled with the on-going efforts to improve tenancy ratio under the property development segment.

• Whilst the concession segment will generate earnings sustainability, current construction orderbook of RM281.3m is able to provide earnings visibility till 2022.

• We assigned a P/E multiple of 9.0x to all, but the concession segment that is valued on a discounted cash flow approach, arriving at a fair value of RM0.72.
   

Investment Highlights

• Diversification into long-term sustainable income. JAKS has successfully repositioned itself as one of the major players in the power plant industry following the commencement of 25-year Build-Operate-Transfer (BOT) 2x600MW coal-fired power plant project in Hai Duong, northern Vietnam. We reckon that the mid-teens IRR and positive cash flow will be a key driver to the turnaround prospects for JAKS.
• Venturing into long term renewable energy. Being one of the 30 shortlisted bidders of the LSS4, JAKS is currently undertaking a private placement to fund the 50MW project. Construction of the plant is expected to commence in 1Q22 and be completed in 1Q23.

• Backed by steady orderbook. We see the construction sector to be supported by existing contracts with outstanding value of approximately RM283.1m. The aforementioned figure represents 1.1x of orderbook-to-cover ratio against FY20 construction revenue of RM263.2m that may provide earnings visibility till 2022.

Source: Mplus Research - 21 Jun 2021