What’s new

• The Group has announced that it bagged a construction and completion of pilling and substructure work from Symphony Crescent Sdn Bhd worth RM37.74m for a SOHO located at Bandar Sunway, Mukim Damansara, Selangor.

Comment

• We understand that the duration of the mentioned contract takes 15.5 months which is expected to commence on 3rd January 2017 and to be completed by 16 April 2018. Therefore, earnings will account beyond 1QFY17.
   
• The current outstanding orderbook stands at RM616m after taking into account this newly clinched contract. The outstanding orderbook provides an earnings visibility of 1.96x 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 an 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 - 5 Jan 2017