- We maintain BUY on Ikhmas Jaya Group Bhd (IJGB) with an unchanged fair value of RM0.70/share, pegged at 12x FY15F PE.

- For the 1H, IJGB’s net profit jumped 76% to RM15mil from RM9mil a year earlier. This on the back of an 11% topline growth to RM140mil.

- Its 1H performance met expectations – making up 50% of our full-year forecast. No dividend was declared.

- Sequentially, topline fell 16% due mainly to the decrease in work done for two projects – an infrastructure project and a piling job. Similarly, net profit fell 18% during the quarter.

- Net margin was maintained at 11% during the quarter (vs. 11% in 1Q). Nevertheless, on a cumulative basis, net margin was a marked improvement at 11% vs. 7% a year earlier. We believe this is due to recognition of jobs that yielded better margins in 1HFY15.

- Improving margins in the 2H will be a positive surprise, but we maintain our net margin assumption of 8% for now.

- Looking ahead, earnings will be supported by its strong order book of ~RM300mil.

- While a bulk of these will be completed by year-end, prospects remain bright with a tender book of ~RM3bil. We understand that management is expected to bid for RM1bil-RM2bil worth of jobs in 2H.

- IJGB may be in a good position to secure jobs given its diversified expertise in piling and foundation works, superstructure, bridge construction and prefabricated building system (PBS).

- Notably, IGJB may benefit as the industry looks at incorporating higher PBS content in construction projects.

- Our new order book replenishment of RM300mil for this year is maintained (RM330mil each for FY16F-17F) based on a conservative win rate of 10%. YTD, it has replenished RM29mil.

- We maintain our 40% earnings growth forecast for this year (supported by its outstanding order book), before it tapers off to 8%-10% over FY16F-17F.

- Our 12x PE target is supported by earnings CAGR of 19% over the next three years. Any job announcement should help to lift its share price – currently trading at 10x PE. Maintain BUY.

Source: AmeSecurities Research - 1 Sep 2015