• Limited downside in anticipation of improving results in FY17 -18, undemanding valuations and the emergence of new major shareholder, Lembaga Tabung Haji. IKHMAS share prices tumbled 21.5% from a 52-week high of RM0.815 (17 May) to close at RM0.64 last Friday, mainly attributed to its weak 1HFY16 results amid the del ays in handover of two key projects (i.e. a flyover package for a road upgrading project outside of Klang Valley, and a basement package for a high-rise project in Klang Valley). Hence, FY16 core earnings is expected to decline 16.7% yoy but should rebound strongly by 60% yoy in FY17, backed by an outstanding orderbook of ~RM600m and recognition of the delayed handovers projects.
• Currently, IKHMAS’ orderbook stood at a healthy ~RM600m (2.2x FY15 revenue). It is gearing up for more subcontract jobs from the booming local construction sector from MRT2, Pan Borneo Highway, SUKE and DASH which will start to hit the market over the next 3-6 months.

• Potential downtrend reversal from grossly oversold levels amid hammer candlestick pattern. Currently, IKHMAS is trading at undemanding valuation at 9.9x FY17 P/E, 15% and 34% lower than its peers (11.7x) and 3-year average (15x), respectively, with consensus

Source: Hong Leong Investment Bank Research - 31 Oct 2016