• 2QFY18 earnings continues to decline 54.8% yoy and 75.9% qoq on higher finance cost and lower progress billings while 1HFY18 earnings surged off a low base to be inline at 51%.

• Management remains cautious given the sector's challenging outlook. We retain our RM500m orderbook replenishment rate assumption for FY18F despite it already achieving 95%.

• Maintain SELL with unchanged RM0.22 TP. Despite its RM927m outstanding orderbook, we are concern over its tight cash flow.

Weaker earnings as expected

Ikhmas Jaya 2QFY18 earnings continues to decline, registering -54.8% yoy due to higher finance cost as a result of short-term debt position in balance sheet which amounted RM92.2m out of RM118.5m total debt. On qoq, earnings fell 75.9% on lower progress billing as some of the key projects are already in acceleration phase. Overall, 1HFY18 earnings were inline at 51.4% of our estimates.

Remains cautious on its prospect

Management remains cautious over its near-term prospect amidst margin pressure owing to high input and regulatory costs as well as stiff competition. Hence, we retain our new orderbook replenishment assumption of RM500m for FY18F; it has already achieved 95% or RM476m thanks to public sector projects – Hospital Kajang and flood mitigation project in Kedah.

Maintain to SELL with unchanged TP of RM0.22

SELL with unchanged TP of RM0.22. Despite having a fairly strong orderbook replenishment and outstanding orderbook of RM927m, we remain concern over its tight cashflow due to high receivables which accounted 71% of its balance sheet size.

Source: BIMB Securities Research - 3 Sept 2018