Rohas announced that it had been awarded two contracts by Power Grid Company of Bangladesh Ltd worth a combined RM192m. This brings its EPCC orderbook to c.RM662m which translates to a healthy 2.9x cover on FY18 EPCC revenue. Its outstanding tower fabrication orderbook stands at c.RM200m translating to 1.1x cover on FY18 tower fabrication revenue. Maintain our forecasts and BUY rating with an unchanged TP of RM0.79. TP is pegged to 12x P/E multiple based on FY20 earnings.

NEWSBREAK

Second job win in FY20. Rohas announced that it had been awarded two contracts by Power Grid Company of Bangladesh Ltd worth a combined RM192m. The scope of work includes design, supply, installation, testing and commissioning of a cumulative 494 kilowatt of transmission lines on a turnkey basis. The contract packages spans a period of 24 to 30 months with works slated to commence in 2H20.

HLIB's VIEW

Strong start to the year. The company has so far secured a cumulative RM250m worth of jobs in FY20. This brings its EPCC orderbook to c.RM662m which translates to a healthy 2.9x cover on FY18 EPCC revenue. Its outstanding tower fabrication orderbook stands at c.RM200m translating to 1.1x cover on FY18 tower fabrication revenue.

Potential awards. Rohas is awaiting an award outcome for a transmission line stretching from Butterworth to Penang Island which will run parallel to the Penang Bridge (estimated project value: RM1bn). There are 5 bidders: from China, India, Australia, Rohas-Muhibbah and MMC-MRCB. The JV structure between Rohas and Muhibbah has not been fixed but will likely be based on job scope breakdown (civil marine works will be >50% of project value). Having undertaken the widening of Penang Bridge before, we reckon Muhibbah is a good partner for Rohas (which will then undertake the transmission line portion of works). Based on management's past guidance, an award outcome may materialise in 1Q20. Apart from that we understand that Rohas will tender for phase 2 extension to its current Laos EPCC contract with a similar contract value.

Associates turnaround in FY20. Rohas 49%-owned mini-hydropower plant in Indonesia is expected to start contributing in FY20, a delay from 2Q19 due to unusual raining season. Management guides that the earnings contribution to Rohas is expected to be c.RM4m annually. We understand its loss-making Vietnamese associate is likely to turn profitable this year as earlier approved water rate hikes is implemented with contribution expected to be between RM3-4m annually.

Forecast. Maintain our forecasts as the contract win falls within our replenishment assumptions.

Maintain BUY, TP: RM0.79. Maintain our BUY rating and TP of RM0.79. We reckon with the completion of its legacy contracts, earnings should grow moving forward driven by stronger profitability at HGPT, new EPCC jobs and stronger tower orders. Our TP is pegged to 12x P/E multiple based on FY20 earnings.

Source: Hong Leong Investment Bank Research - 21 Feb 2020