What’s new

• The group has announced that it bagged an Earthwork and Pile Cap, contiguous bored pile and substructure works from TTDI KL Metropolis Sdn Bhd worth RM57.94m for a service apartment located at Mukim Batu Daerah Kuala Lumpur.

Comment

• We learnt that the duration in respect of the service apartment foundation/pile caps/Lowest Slab takes 8 moths and slated to be in full completion by 17 July 2017. Meanwhile, all other works are spanning for 15 months and expected to be completed by 17 February 2018. Therefore, earnings will only account beyond FY16.

• Year to date, the group has replenished order book amounting to RM630m with current outstanding orderbook stands at RM578m after taking into account this newly clinched contract. The outstanding orderbook provides an earnings visibility of 1.8x FY15 earnings assuming a net profit margin of 8%.

Earnings Outlook/ Revision

• We retain our earnings forecast for FY16 and FY17 as this contract win falls within our target order book of RM400m for FY17.

Valuation/Recommendation

• Maintain BUY with unchanged target price of RM0.76. We derived our valuation by pegging at 13x FY2017F PE. The target PE assigned is at the range of upcycle PE for small-and-mid cap contractors amid current booming infrastructure works.

• Despite the recent earnings cut, we still maintain our positive view on the Group as bored pilling and fundamental works still remain vibrant. We believe the Group will resume its growth trajectory in FY17 given more construction works in the pipeline, especially under government’s initiative such as ETP, TOD (Transit-Oriented Development) and the Corridor and City Transformation Programmes that would render job opportunities to Ikhmas Jaya

Source: JF Apex Securities Research - 28 Nov 2016