• One of the leading local piling specialists. IKHMAS is a construction company specialising in piling and foundation, bridges, building works, and prefabricated building system (PBS). Compared to other listed piling contractors, IKHMAS’ earnings are more diversified given its involvement in superstructure works, bridge construction and PBS, which could be a better proxy to the construction sector’s growth.
• Currently, its order book stood at ~RM300m (about 1.2x FY14 revenue) after taking account into the newly clinched subs tructure works’ project of RM161m in Nov 2015 from MRCB Builders and RM166m Opus serviced apartments projects secured in Jan 2016. Given the resilient demand for piling jobs (as well as superstructure works) in the market, IKHMAS is tendering about RM3bn jobs. Management is expecting new order book replenishment target of RM300m for FY16 and RM330m for FY17, benefitting from the ongoing and new infrastructure and project jobs under the 11th Malaysia Plan as well as those initiated by the private sector.
• Poised for a triangle breakout. With prices holding above daily lower Bollinger band and support trendline, IKHMAS appears to be at the tail end of its ascending triangle consolidation pattern to launch a breakout soon. A decisive breach above RM0.70 (downtrend line) is likely to spur prices higher towards the RM0.725 (61.8% FR from peak RM0.835 and low RM0.54) and RM0.765 (76.4% FR), before reaching our long term objective of RM0.835 (52-week high).
• Key supports are RM0.66 (4 Jan low) and RM0.64 (21 Oct low). Cut loss at RM0.63.
• Attractive risk to reward ratio with 21% upside against 10.5% downside. At RM0.68, IKHMAS is trading at 1.89x P/B, about 11% lower against its peers. All in, we see a good risk to reward ratio for investor with a theoretical entry price of RM0.68 given that the downside to the cut loss zone of RM0.63 is 5 sen (-7.4%) while the upside to the LT target of RM0.835 is 15.5 sen (+22.8%).

Source: Hong Leong Investment Bank Research - 15 Jan 2016