News  Yesterday, Crest Builder (CRESBLD) was awarded a contract by Gelangang Harapan Construction Sdn Bhd (GHC) for the construction of the superstructure works of an office building spanning over 19 months for a total consideration of RM90.0m.

Comments  We are neutral to positive with the announcement as this would be CRESBLD’s second contract award for the year which falls within with our orderbook replenishment assumption of RM150.0m for FY14. To recap, CRESBLD secured its first orderbook replenishment back in Feb-14 amounting to RM63.9m and with the RM90.0m replenishment from GHC, CRESBLD has fully met our FY14 orderbook replenishment assumption of RM150.0m.

 The RM90.0m construction award would further give the outstanding orderbook (previously at c.RM70.0m) a lift to c.RM160.0m, which would provide the group another 1.5 years earnings visibility.

Outlook  CRESBLD’s outlook remains intact with management focusing on its bread and butter business by continuing to secure more quality construction orderbook replenishments with pretax margin ranging between, 8% - 10%. As for its property development segment, the construction works on its first Transit-Oriented-Development project at Dang Wangi LRT station has been progressing well and is slated for launch in early 2015.

Forecast  There are no changes to our FY14-15E estimates, as the construction orderbook replenishment was well within our FY14E orderbook replenishment assumption of RM150.0m. As for FY15, we have an orderbook replenishment assumption of RM300.0m.

Rating Maintain OUTPERFORM

Valuation  We reiterate our OUTPERFORM call on CRESBLD with an unchanged Target Price of RM1.62 based on SoP, as we believe that CRESBLD would benefit from the robust construction sector in coming years coupled with the potential earnings catalyst from its first TOD project namely the Bank @ Jalan Ampang with a GDV of RM1.0b. Our TP of RM1.62 implies a FY15 Core PER of 8.5x that is still within our midcap developers’ average of 8.0x – 9.0x.

Risks to Our Call Unable to launch its TOD projects.

 Slower-than-expected progressive billings.

 Lower-than-expected construction orderbook replenishment.

Source: Kenanga