Investment Highlights

• We maintain our forecasts, FV of RM0.80 and BUY call, following the award of a RM188.6mil substructure package (earthworks, piling, diaphragm wall & reinforced concrete works) of Bukit Bintang City Centre by BBCC Development Sdn Bhd.

• Our FV is based on 13x FY18F EPS of 6.13 sen, at a slight premium to our 1-year forward target PE of 10-12x for small-cap construction stocks, to reflect a relatively less competitive piling segment vis-à-vis general contracting.

• The latest contract has boosted Ikhmas’ YTD job wins to RM333.3mil and its outstanding order book to RM881.6mil (Exhibit 1).

• Our forecasts assume an order book replenishment target of RM500mil annually in FY17-19F, which is consistent with Ikhmas' job wins of RM495mil in FY16.

• We are positive on the latest development. We continue to like Ikhmas as it is a good proxy to the booming piling/foundation segment underpinned by current mega infrastructure projects such as MRT2, Pan Borneo Highway, SUKE and DASH, as well as those that are getting off the ground over the short to medium term such as LRT3, ECRL and KL-Singapore HSR.

• Its earnings visibility is good, backed by a sizeable order backlog which will keep it busy for the next 12-24 months. The entry barrier to the sector is high given the high costs of equipment and machinery as well as the limited availability of experienced operators.

Source: AmInvest Research - 6 Jun 2017