Rohas announced that it had been awarded a contract by Power Grid Company of Bangladesh Ltd worth RM102m. This brings its EPCC orderbook to c.RM630m which translates to a healthy 1.8x cover on FY19 EPCC revenue. Its outstanding tower fabrication orderbook stands at c.RM170m translating to 1.3x cover on FY19 tower fabrication revenue. Increase earnings forecasts by 2-3%. Maintain BUY rating with TP of RM0.51. TP is pegged to 10x P/E multiple based on FY20 earnings.

NEWSBREAK

Third job win in FY20. Rohas announced that it had been awarded a contract by Power Grid Company of Bangladesh Ltd worth RM102m. The scope of work includes design, supply, installation, testing and commissioning of 400 kilowatt of transmission lines on a turnkey basis. The contract packages spans a period of 24 months with works slated to commence in 3Q20.

HLIB's VIEW

On a roll. The company has so far secured a cumulative RM352.4m worth of jobs in FY20, of which three are from Bangladesh. This brings its EPCC orderbook to c.RM630m which translates to a healthy 1.8x cover on FY19 EPCC revenue. Its outstanding tower fabrication orderbook stands at c.RM170m translating to 1.3x cover on FY19 tower fabrication revenue.

Bangladesh. So far, Rohas has secured 3 EPCC contracts worth a cumulative RM294m in Bangladesh with commencement likely by 3Q20. While the country is currently in lockdown (extended to 30 May 2020), the timeline for commencement of its projects are at present not affected by the lockdown. In the event of a rapid escalation of cases and a prolonged lockdown, delay risks are low as we understand 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. Previously estimated delivery timeline for the remaining towers is slated for 1H20. Nonetheless, MCO extensions will likely delay deliveries to 2H20. Recall that Sarawak has allocated c.RM1bn for the rollout of telco towers (including EPCC and tower costs).

MCO updates. Rohas has guided that domestic operations has been approved to restart by late April. However, resumption of operations have been slower than expected as by GoM enforced a ruling requiring all foreign workers to be tested for Covid-19 (4 May 2020). At present, management is experiencing challenges in getting its foreign workers tested due to limited test centres located nearby.

Forecast. Increase FY20/21 earnings by 1.7%/2.6% to reflect higher replenishment assumptions. We take this opportunity to introduce FY22 earnings of RM32m.

Maintain BUY, TP: RM0.51. Maintain our BUY rating with slightly higher TP of RM0.51 post earnings adjustments. We like its recovery potential post-MCO as commencement of its Bangladeshi projects provides for a steeper earnings recovery trajectory.

Source: Hong Leong Investment Bank Research - 18 May 2020