News

• Won affordable housing job. Pesona announced that it has been awarded a RM216.4m contract from Gaya Kuasa Sdn Bhd for an affordable housing job in Bukit Jalil. The job involves 2 blocks of 42-storey apartment over a period of 32 months commencing July 2018.

Comments

• Job wins adding up after a quiet FY17. This contract is Pesona’s 2 nd job win for FY18 bringing the cumulative sum to RM378m. Coming off a quiet FY17 with no new job wins, it appears that job flow momentum is picking up for Pesona. With this recent job in the bag, we estimate Pesona’s orderbook to stand at RM1.9bn, implying a cover of 3.6x on FY17 construction revenue.

• What’s next? Looking ahead, in terms of potential job wins, Pesona is targeting for several building type jobs in the tune of >RM500m. This includes hospitals, government facilities, condos and affordable housing. There could also be job flow potential from its sister-co, Juta Asia (unlisted) via upcoming new property developments.

• SEP acquisition concluded. Pesona’s acquisition of its 1 st

tranche (70% stake) in SEP (concessionaire of UNIMAP hostel) was completed in end-Sept 2017. The 2 nd tranche acquisition (balance 30% stake), this is targeted for completion by 3Q18.

Risks

• Higher material prices impacting margins.

Forecasts

• Unchanged as YTD job wins of RM378m is still within our full year orderbook replenishment assumption of RM500m.

Rating

Maintain BUY, TP: RM0.52

• While its recent 4Q17 results disappointed, we are hopeful for a recovery in FY18 as orderbook execution picks up coupled with the full year impact from SEP’s contribution.

Valuation

• Our fully diluted SOP based TP of RM0.52 implies FY18-19 P/E of 13.8x and 11.5x, respectively.

Source: Hong Leong Investment Bank Research - 26 Mar 2018