Pesona JV has secured a new contract from Melati Ehsan worth RM218.22m for construction of high rise building in KL. The works are expected to commence on September 2018 and be completed in 26 months. Order book is now estimated at RM1.8bn, implying a cover ratio of 3.5x. While these job wins are positive, we remain cautious on the macro job flow outlook following the new government’s review on mega projects. Forecast unchanged as YTD job wins are still within our target. Maintain HOLD, TP: RM0.28.

NEWSBREAK

RM218m building job. Pesona announced that its Intersegi Sdn Bhd- Pesona Metro Sdn Bhd JV has been awarded a new contract from Melati Ehsan Holdings Berhad worth RM218.22m (c.RM109m for Pesona effective interest) for construction of high rise building in Jalan Conlay, Kuala Lumpur. The works are expected to commence on September 2018 and will be completed in 26 months.

HLIB’s VIEW

Third job win in FY18. This is the third construction job win for the company which brings the YTD sum to RM487m, approaching our full year replenishment assumption of RM500m. Pesona’s total orderbook now stand at c.RM1.8bn, translating to a healthy cover of 3.5x on FY17 construction revenue.

Cautious on job flow outlook. While these contract wins are positive, we remain cautious on the overall macro job flow outlook. This follows from the new government’s move to put all mega projects under review which would inevitably result to project rollout delays or an outright cancellation.

Higher competition for private sector jobs. While Pesona has traditionally relied more on private sector developers for jobs as opposed to the public sector. Nonetheless, we with the potential scaling back of government spending, we feel that competition for private sector jobs could intensify as other contractors start bidding within this space.

Forecast. Unchanged as YTD construction job win is still within our full year target of RM500m.

Maintain HOLD, TP: RM0.28. Maintain HOLD rating and SOP- driven TP of RM0.28 Despite its decent order book level, we remain cautious on the slowing macro job flow outlook.

Source: Hong Leong Investment Bank Research - 20 Aug 2018