What’s new

• Ikhmas Jaya has received a letter of award of RM78m from Kerjaya Prospek (M) Sdn Bhd to execute and complete the marine bridge crossing the sea linking Jalan Seri Tanjung Pinang to STP2 island

Comment

• We learnt that the duration of the above mentioned project is about 21 months commencing on 11 July 2018 and completion on 10 April 2020.

• Year-to-date, the Group has successfully secured total contracts of RM477.4m, accounting for 95.5% of our RM500 estimated orderbook replenishment for FY18F.

• Low margin from the project. We predict the project will generate a low PBT margin of lesser than 6% since the contract does not include any design works.

• The current outstanding orderbook stands at RM1018m after taking into account of this newly secured contract. As such, we believe that the outstanding orderbook could provide earnings visibility of 5.5x FY17 earnings assuming a net profit margin of 5.4%.

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 RM0.33. We like the Group for its sizeable outstanding orderbook. We derive our target price by pegging the valuation at 8.9x FY18F PE (mean PE) based on EPS of 3.67 sen.

Source: JF Apex Securities Research - 19 Jul 2018