Ikhmas won two major contracts worth RM257.7m. The larger of the two, worth RM199m, is for upgrade works of the Kajang Hospital and stretches over 36 months or up to 2021. The second, worth RM58.7m, includes demolition of existing structures and construction of a 2.5- storey substructure works for Putrajaya Ventures’ Lot 155 development along Jalan Ampang. This for 18 months (or up to 2019). We roughly estimate that these contracts would add 12% to Ikhmas’ annual profits.
With this announcement, total job wins in 2018 amounts to RM296.2m or 59% of our assumed RM500m orderbook replenishment in the year. This brings total orderbook to c.RM889.5m from c.RM632m (at end Feb 2018) with a mixture of building and piling and foundation works. We expect the piling and foundation works will be the main earnings driver in 2018 progress billings from several projects are due in the year.
We are positive on the job win outlook for the piling and foundation sub-sector following recent developments on mega projects – the LRT 3, ECRL and the Gemas-JB Double Tracking.
We upgrade the stock to a BUY with an unchanged TP of RM0.51 which is based on 11.1x P/E multiple pegged to our 2018E estimate. Despite the morning session already seeing an 11% price increase, the stock still trades at an attractive 8.5x 2018E P/E.
Source: BIMB Securities Research - 10 Apr 2018
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