Valuation / Recommendation

We have a SUBSCRIBE recommendation on Siab with a target price of RM0.36 based on peers average PE of 13.9x and FY22F EPS of 2.6 sen on the premise of a healthy order book and a proven track record. The target price represents a potential return of 20.0% over the IPO price. Siab may have more opportunities to secure new contracts against the backdrop of a recovering construction sector, which could expand by 11.5% in 2022 as forecasted by department of statistics Malaysia (DOSM).

Investment Insights

Strong financial position. Siab has cash and equivalents of RM21.4m and total borrowings of RM16.5m post listing, which allows the company the potential capacity to undertake more projects moving forward.

Healthy order book. The company has order book of RM545m as at 28 January 2022, comprising 20.9% from non-residential construction, 79.1% from residential construction which should provide earnings visibility over a period of 3 years. The company also has a tender book of RM1.5bn and a tender success rate of 10-15%, that if successful will increase the order book.

Proven track record. Siab has completed more than RM1.5b worth of project value since 2013 and won contracts from established property developers even during the Covid-19 pandemic. The company has an experienced management team led by the managing director, Mr Ng Wai Hoe who has more than 24 years of experience in the construction industry. As at LPD, the company has completed several notable non-residential projects such as the Quayside Mall Project, Hospital Bentong Project, The Pines Project, and the LGB Tower Project.

Diversified revenue stream. Besides providing building construction services, the company also provides other complementary services such as provision of ICT solutions and services.

Risk factors. (1) Failure to secure new projects. (2) Unexpected project cancellations, delays, or postponement of projects. (3) Unanticipated increases in construction costs for projects. (4) Prolonged Covid-19 pandemic.

Source: Mercury Research - 7 Feb 2022