Pesona has secured a new contract from TA Global worth RM264.3m for construction of serviced apartment in PJ. The works commenced on August 2018 and be completed in 32 months. YTD job win of RM860m has exceeded our full year replenishment assumption. Orderbook is now estimated at RM2.2bn, implying a cover ratio of 4.3x. While these job wins are positive, we remain cautious on the macro job flow outlook following the new government’s review on mega projects. Increase FY18-20 earnings forecast by 2-17%. Maintain HOLD with higher TP of RM0.32 (from RM0.28).

NEWSBREAK

RM264M building job. Pesona announced that it has been awarded a new contract from TA Global Berhad worth RM264.3m for construction of serviced apartment in Bandar Sri Damansara, Petaling Jaya. The works had commenced on 15 August 2018 and will be completed in 32 months.

HLIB’s VIEW

Fourth job win in FY18. This is the fourth construction job win for the company which brings the YTD sum to RM860m, exceeding our full year replenishment assumption of RM500m. Pesona’s total orderbook now stands at c.RM2.2bn, translating to a decent cover of 4.3x 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.

Forecast. Increase FY18-20 earnings forecast by 1.4%, 7.5% and 17.3% respectively after adjusting FY18 orderbook replenishment assumption as YTD construction job win exceed our full year target of RM500m. We assume no further job win in the rest of FY18 due to slowing job flow post GE14.

Maintain HOLD, TP: RM0.32. Maintain HOLD rating with higher SOP driven TP of RM0.32 (from RM0.30) following earnings forecast adjustment. FY18-20 implied PE of our TP are 15.4x, 9.4x and 6.6x respectively. Despite its decent order book level, we remain cautious on the slowing macro job flow outlook.

Source: Hong Leong Investment Bank Research - 5 Sept 2018