• 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 divers ified given its involvement in superstructure works, bridge construction and PBS, which could be a better proxy to the cons truction s ector’s growth. Currently, IKHMAS’ order book s tood at a healthy RM520m (1.94x FY15 revenue) after taking into account the newly clinched substructure and subcontract work projects with a total value of RM232m YTD.
• Gearing up for wider job scope. Its tender book remains at RM3bn, which comprises infrastructure jobs (50%), piling (30%), superstructure (20%). On top of that, IKHMAS is bidding for expressway infrastructure works namely DASH, SUKE, DUKE 3 and Pan Borneo Highway, which are expected to be awarded in stages starting mid-June this year. Meanwhile, the Group is venturing into track laying, i.e KVMRT2, LRT3.
• Beneficiary of stronger Ringgit. The shift in investor focus away from exportoriented companies to domestic plays given the strengthening of the Ringgit should generate interest in construction stocks. We expect the award of multi - billion Ringgit infrastructure development contracts to accelerate this year to support economic growth given the external headwinds. On a positive note, the rising weight of Chinese FDI’s and inves tments lately could also provide a strong foundation to help funding some of the upcoming 11MP projects.
• Poised for a triangle breakout. Having corrected 35.3% from 52-week high of RM0.835 (28 Jul 2015) to a low of RM0.54 (25 Aug 2015), IKHMAS share prices have been traded range bound within RM0.61-0.725 band in the last six months. Yesterday, the stock ended 0.8% lower at RM0.655, with daily volume totaled 2.5m shares transacted (+198% and 93% against 1-month and 3-month average, respectively).
• We believe IHKMAS share price appears to be at the tail end of its LT triangle consolidation pattern to launch a breakout soon. A decisive breach above RM0.67 (downtrend line) is likely to spur prices higher towards the RM0.68 (23.6% FR) and RM0.725 (6M high) targets before reaching our long term objective of RM0.775. Key supports are RM0.63 (50% FR) and RM0.62 (lower Bollinger band). Cut loss at RM0.605.

• Attractive risk to reward ratio with 20.6% upside against 7.6% downside. All in, we see a good risk to reward ratio for investor with a theoretical entry price of RM0.655 given that the downside to the cut loss zone of RM0.605 is 5 sen (-7.6%) while the upside to the LT target of RM0.79 is 13.5 sen (+20.6%).

Source: Hong Leong Investment Bank Research - 23 Mar 2016