Fabrication orderbook currently stands at c.RM170m, translating into 1.3x cover. EPCC orderbook stands at RM530m, translating into 1.5x cover. Rohas’s project execution has been delayed in various countries. Nonetheless, management remains optimistic for a restart despite the lockdown due to its involvement in critical power utilities infrastructure. Progress in Indonesia has not been halted with earnings contribution to come in 2H20. Maintain forecasts and BUY rating with higher TP of RM0.50. TP is derived from pegging FY20 earnings to 10x P/E multiple.

Outstanding orderbook. Fabrication division outstanding orderbook currently stands at c.RM170m, translating into 1.3x of FY19 tower revenue. EPCC orderbook stands at RM530m, translating into 1.5x of FY19 EPCC revenue. Given the usual contract duration of both segments (18-36 months), orderbook level looks healthy. While the company did not divulge its outstanding tenderbook, we were made to understand tenders for domestic opportunities are still ongoing with its latest tender submission being 2 weeks ago.

Penang transmission line. Rohas is still waiting for the award outcome which was expected to be awarded in 1Q20 initially. The job comprises of a transmission line from Butterworth to Penang Island which will run parallel to the Penang Bridge (estimated project value: RM1bn). In bidding for the job, Rohas has formed a JV with Muhibbah and are up against 4 other bidders.

Laos EPCC. Progress for Laos EPCC contract (RM300M) has hit a snag with completion rate at c.70% (RM180m) at end FY19. Initially, the company was targeting to achieve project completion by March 2020. Nonetheless, a nationwide lockdown has inevitably delayed the completion to 3Q20.

Bangladesh EPCC. Rohas has recently secured 2 EPCC contracts worth a cumulative RM192m in Bangladesh, both of which are scheduled to start in 2H20. While the country is currently in lockdown, the client, Power Company of Bangladesh has approached the government to allow construction of its critical power infrastructure. Management reckons that given frequent electricity shortages, chances are high to secure approval for permitting critical EPCC works despite the lockdown.

Telco tower deliveries. To recap, previously Rohas secured fabrication contracts in Sarawak for 130 out of 300 towers tendered with an estimated value of RM19.5m (RM150k per tower). As of Dec-19, roughly half of the towers have been delivered. Delivery timeline for the remaining towers is slated for 1H20. Recall that Sarawak has allocated c.RM1bn for the rollout of telco towers (including EPCC and tower costs).

Indonesia. Construction of Rohas’s 49% owned mini-hydro in Indonesia is still on going in Acheh with civil works scheduled to complete by end Apr-20. Earnings contribution should commence upon plant’s commissioning targeted for 2H20. Prior management guidance indicates annualised earnings contribution to Rohas is expected to be c.RM4m.

Forecast. Maintain forecasts as we have earlier slashed earnings in anticipation of execution delays.

Maintain BUY, TP: RM0.50. Maintain BUY with higher TP of RM0.50 (RM0.40). We reckon due to the nature of its business, earnings recovery trajectory post-MCO is likely to be relatively steeper. TP is derived from pegging FY20 earnings to higher 10x (from 8x) P/E multiple as we think the overall Covid-19 impact to the stock is more transient than our initial assessment.

Source: Hong Leong Investment Bank Research - 20 Apr 2020