Following the expectations of the whole Selangor water consolidation exercise to be completed by Jan 2019, Taliworks is envisaged benefit from rollout of water infrastructure projects given its experience in construction of water infrastructures and its role as O&M operator for SSP1 in Selangor. Valuation is still undemanding at 14.2x FY19 P/E (25% below 10Y average of 19x), supported by a 17% EPS CAGR from FY18-20 and attractive 8.5% DY for FY19-20.

HLIB institutional research maintains a BUY rating with RM1.01 target price. Management is optimistic that the whole Selangor water consolidation exercise should be completed by January 2019 if everything goes on schedule. As water related infrastructure projects in low reserve margin states such as Kedah and Selangor are given priority as mentioned in the 11MP Mid-term Review, we believe Taliworks to benefit from rollout of water infrastructure projects given its experience in construction of water infrastructures and its role as O&M operator for SSP1 in Selangor. Assuming that management follows the repayment schedule proposed by Air Selangor, Taliworks is an attractive dividend yield proxy with potential DY of 8.5% in FY19-20.

Uptrend intact. Taliworks has been holding up well above multiple key SMAs and the LT support trendline since June 2018. A decisive breakout above immediate resistance of RM0.90 (19 Nov high) will increase the likelihood of the resumption of further advance towards RM0.96 (13 June hgih) and our LT objective of RM1.00 psycholigical barrier. Meanwhile, key supports are situated at RM0.82 (50d SMA) and RM0.80. Cut loss at RM0.78.

Source: Hong Leong Investment Bank Research - 29 Nov 2018