We maintain our BUY call, forecasts and  MYR0.96  FV. This  follows the award  of  the  MYR994m  Langat  2  water  treatment  plant  contract  to  a consortium  which comprises  Ahmad Zaki.  The latest job win  is in line with our assumption.  Ahmad Zaki is a good small-cap proxy to  public infrastructure  spending.  We  also  like  the  company  for  its  concession assets and oil palm plantations in Indonesia.

• First key contract win in FY14.  A 36:34:30 JV between Salcon (SALC MK,  NR),  MMC  Corporation  (MMC  MK,  NR)  and  Ahmad  Zaki  has secured a MYR994m contract for the construction of the 1,130m  millionlitre-per-day (MLD) Langat 2 water treatment plant. Assuming the job is apportioned in accordance with  the stake in the JV, Ahmad Zaki’s share will be MYR298m. This is the first key contract the company has secured in  FY14,  boosting  its  outstanding  construction  orderbook  by   15%  to MYR2.2bn (see Figure 1) from MYR1.9bn. Assuming an EBIT margin of 10%,  the  contract  will  fetch  MYR29.8m  EBIT  over  a  3-year  contract period starting this month. We are positive on the latest development.
• Forecasts. We maintain our forecasts  as we have assumed  Ahmad Zaki to secure MYR500m worth of new contracts in FY14.
• Maintain  BUY.  Ahmad  Zaki  is  a  good  small-cap  proxy  to  public infrastructure  spending  given  its  involvement  in  the  construction  of  the Klang  Valley  MRT  project  and  various  government  facilities.  Its  current outstanding  construction  orderbook  of  MYR2.2bn  (that  can  last  the company  for  2-3  years)  will  surge  by  69%  to  MYR3.7bn  when  the MYR1.55bn  East Klang Valley Expressway (EKVE)  breaks  ground over the immediate term. We also like Ahmad Zaki for its stable of concession assets  comprising:  i)  a  highly  profitable  bunkering  operation  at  the Kemaman Supply Base  (KSB)  in Terengganu,  ii) a teaching hospital at the  International Islamic University of Malaysia  (IIUM),  which is currently under construction  and  about  26% completed,  and iii)  the EKVE  under planning. In addition, there is  tremendous value in its 21,000ha oil palm plantations  (23% planted) in West Kalimantan, Indonesia.  We keep our FV unchanged at MYR0.96, based on SOP valuation (see Figure 2).

Financial Exhibits

SWOT Analysis

Company Profile
Ahmad  Zaki  is  primarily  a  construction  company.  It  owns  a  concession  to  operate  bunkering  at  the  Kemaman  Supply  Base  in Terengganu. It also has two concessions currently under construction/planning, namely, the MYR413m International Islamic Univ ersity Malaysia (IIUM) teaching hospital in Kuantan based on a private finance initiative (PFI) model, and the MYR1.55bn East Klang Valley Expressway (EKVE). It also owns about 21,000ha of plantation land in East Kalimantan, Indonesia, of which about 5,000ha are planted.

Recommendation Chart

Source: RHB