Tuju Setia Bhd (TJSETIA) is principally involved in the construction of: i) non residential buildings including mixed-use commercial buildings, offices, serviced apartments and institutional buildings such as schools and hospitals; and ii) residential buildings that include high-rise condominiums and affordable apartments. As a main contractor, the group is responsible for the overall project including project planning and management as well as implementation of all stages of the project for timely completion. TJSETIA engages subcontractors to carry out the construction related works under its supervision, control and management while project planning and management are carried out internally by the group’s staff. In Sept 2018, TJSETIA secured its first contract for the design and construction of a new women and children’s complex as part of the Kajang Hospital in Selangor.

Moving forward, TJSETIA intends to expand its core competency in building construction focusing on high-rise buildings, widen its services to cover design and construction for hospital projects as well as scale up its operational facilities. We derive a fair value of RM1.11 based on an 11x PE multiple to its FY2022F EPS of 10.1sen. The IPO is expected to raise approximately RM56.0m from the issuance of 80.0m new shares. Besides utilising 57.1% of the proceeds for capital expenditure, 33.9% of the proceeds are allocated for working capital.

• Growth drivers. TJSETIA’s growth will be dependent on: i) expansion of its core competency in high-rise buildings construction, ii) expansion of its services to cover design and construction for hospital projects, and iii) expansion of its operational facilities.

• Competitive strengths. TJSETIA’s competitive strengths include: i) having an established track record in diverse range of high-rise construction, ii) providing timely completion of projects and quality of construction works, iii) adoption of various industrialised building system (IBS) construction techniques and offer of value engineering in providing alternative designs, iv) ability to provide design and construction of hospitals, and v) having qualified and experienced management team.

• Catalysts. Key drivers may include: i) favourable interest rate as well as lending policies, ii) availability of loans for construction, and iii) government initiatives in implementing various affordable housing schemes and continuation of large-scale infrastructure projects.

• Key risks. Key downside risks, among others, include i) competition from other construction companies, ii) exposure to the inherent risks in the construction industry, iii) dependency on its subcontractors, iv) unanticipated increases in the cost of construction, and v) potential exposure to liquidity risk as a result of delay in collection or non-recoverability of trade receivables.

Source: PublicInvest Research - 5 May 2021