What’s new

• Ikhmas Jaya has received a Letter of Award of RM 101.8m from Ministry of Natural Resources and Environment/Department of Irrigation and Drainage Malaysia to undertake the project “Rancangan Tebatan Banjir Sungai Choras/Sungai Salad dan Struktur-strucktur serta Kerja-kerja Berkaitan”.

Comment

• We learnt that the duration of the above mentioned project from Ministry of Natural Resources and Environment is about 36 months and the executed date will be determined at a later date.

• Year-to-date, the Group has successfully secured total contracts of RM399.4m, accounting for 79.8% of our RM500 estimated orderbook replenishment for FY18F.

• The current outstanding orderbook stands at RM1030.5m after taking into account of this newly secured contract. As such, we believe that the outstanding orderbook could provide earnings visibility of 5.4x FY17 earnings assuming a net profit margin of 7.5%.

Earnings Outlook/ Revision

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

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

Valuation/Recommendation

• Maintain BUY with an unchanged target price of RM0.55. We like the Group for its: a) sizeable outstanding orderbook, and b) strong contract win. We derived our valuation, which is pegged at 10.3x FY18F PE (+1.0 SD) based on EPS of 53 sen.

Source: JF Apex Securities Research - 20 Apr 2018