What’s new

• Ikhmas Jaya has received a Letter of Award of RM 58.7m from Putrajaya Ventures Sdn Bhd for the proposed demolition works of existing 3 storeys office building, proposed construction and completion of substructure works consist of 2 level parking area on Lot 155, Jalan Ampang.

• Furthermore, the Group also received another Letter of Award from Naluri Rezeki Sdn Bhd for a total contract value of RM198.9m to design, construct, testing, commissioning, maintaining and complete for the Hospital Kajang project.

Comment

• The duration of the above mentioned project from Putrajaya Ventures Sdn Bhd is 18 months from the date of site possession. The date for site possession to be determined soon.

• Similarly, the duration of project from Naluri Rezeki Sdn Bhd is about of 36 months and defect liability period is 24 months from the date of letter of award.

• Year-to-date, the Group has successfully secured total contracts of RM297.6m, accounting for 59.5% of our RM500 estimated orderbook replenishment for FY18F.

• The current outstanding orderbook stands at RM928.6m after taking into account of these newly secured contracts. As such, we believe that the outstanding orderbook could provide earnings visibility of 4.8x FY17 earnings assuming a net profit margin of 7.5%.

Earnings Outlook/ Revision

• We retain our earnings forecast for FY18 and FY19 as the contracts win fall within our new orderbook target of RM500m for FY18F.

• Major risk to our earnings forecast is any unforeseen delay in execution and recognition of construction progress.

Valuation/Recommendation

• Upgrade to BUY from HOLD with an unchanged target price of RM0.55 as we believe its value re emerges following recent decline in share price. We derived our valuation, pegging at 10.3x FY18F PE (+1.0 SD) based on EPS of 53 sen.

Source: JF Apex Securities Research - 10 Apr 2018