Investment Highlights

• We maintain our forecasts, FV of RM0.61 and BUY call. Our FV is based on 13x FY19F EPS of 4.7 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.

• This follows the award by the Ministry of Natural Resources & Environment/Department of Irrigation & Drainage to Ikhmas of the Sg Pendang flood mitigation project in Kedah and other related works worth a total of RM101.8mil.

• The latest contract has boosted Ikhmas’ YTD job wins to RM398mil, and its outstanding order book to RM991mil (Exhibit 1). We are keeping our order book replenishment assumption of RM500mil annually in FY18-20F. We are positive on the latest development.

• We project Ikhmas’ net profit to grow by 55.3% in FY18F from a washout in FY17. Subsequently, improved margins should drive another 65.1% rise in net profit in FY19F.

• We continue to like Ikhmas for: (1) the bright prospects of the piling/foundation segment backed by various mega projects; (2) its strong earnings visibility underpinned bya sizeable order backlog; and (3) the high entry barrier to the sector given the high costs of equipment and machinery and limited availability of experienced operators.

Source: AmInvest Research - 20 Apr 2018