News

• Wins transmission lines contracts. Rohas 75%-owned subsidiary, HG Power Transmission Sdn Bhd (HGPT) was awarded two contracts with total value of c.RM250m from Tenaga National Berhad (TNB). The job scope for both contracts involves supply and installation of transmission lines on a turnkey basis. Expected contractual completion period for both contracts is 723 days.

Comments

• EPCC orderbook at a high. Following the award of these 2 contracts, Rohas current EPCC orderbook is estimated at RM900m. This is expected to provide a strong boost to Rohas’ earnings growth going forward as the current contribution from EPCC division is minimal.
• Conservative orderbook replenishment assumption. YTD job wins of c.RM250m made up c.80% of our full year orderbook replenishment assumption of RM300m for HGPT. As a result, any further job wins for FY18 which we deemed highly likely would provide upside to our earnings forecast.
• Multiple catalysts for FY18. Multiple catalysts exist for Rohas share price in FY18. Earnings are expected to grow significantly yoy due to contribution from RM300m Laos EPCC project and full year contribution of HGPT. Moreover, Rohas is aiming to double its job replenishment this year to c.RM800m which we deem achievable given strong balance sheet of the company. Besides, we opine that expectation of admission into the Shariah list this year further increase buying interest of the stock.

Risks

• Failure to clinch future EPCC projects

Forecasts

• Unchanged as YTD job wins of c.RM250m is within our ful l year target of RM300m for HGPT. Any further job wins for FY18 would provide upside to our earnings forecast.

Rating

Maintain BUY, TP :RM1.69↔

• We like Rohas for its exposure to ASEAN which is one of the fastest growing economic regions in the world. Infrastructure investment needs are expected to be robust in the foreseeable future and this will generate steady demand for the products of the company.
• The acquisition of HGPT is expected to open up more EPCC contract opportunities for Rohas in new markets and we expect stable EPCC contract flows for the company due to the essential nature of infrastructure industry in emerging markets.

Valuation

• Maintain BUY recommendation with unchanged TP of RM1.69. Our TP is based on unchanged 16x P/E multiple pegged to FY18 earnings.

Source: Hong Leong Investment Bank Research - 20 Feb 2018