Results Review

• INTA’s FY23 core earnings of RM23.5mn beat our expectation, accounting for 112.2% of full-year estimates. The positive surprise was mainly driven by higher-than-expected revenue recognition from ongoing construction projects.

• A third interim dividend of 0.5sen/share was declared, bringing the total dividend declare in FY23 to 1.5sen/share. (FY22: 0.75sen/share)

• YoY, FY23 revenue leapt by 39.4% to RM650.1mn, attributed to increasing revenue recognition from construction projects compared to the preceding year. In line with revenue growth, INTA’s core PBT more than doubled to a record high of RM32.4mn (FY22: RM14.8mn). Notably, the EBIT margin improved by 2.1ppt, attributed to easing steel bar costs.

• QoQ, 4QFY23 revenue slid 4.6% to RM158.8mn, owing to slower revenue recognition compared to 3QFY23. That said, the core PBT rose to RM10.0mn (+12.9% QoQ), thanks to margin recovery from easing material and labour costs.

Impact

• In line with management’s guidance, we have revised our FY24 and FY25 job replenishment assumptions to RM800mn each, up from RM600mn and RM700mn, respectively. Consequently, our FY24 and FY25 earnings projections have increased by 1.3% and 12.4% to RM20.2mn and RM24.5mn, respectively.

• Meanwhile, we introduce FY26F earnings estimates with an earnings growth of 13.8%.

Outlook

• We believe the recovery of the construction sector is anticipated to be accelerated in CY24, driven by the resumption of new residential projects that were previously delayed in FY22 due to unfavourable input costs (i.e. steel bar and labour costs). The potential upswing in the sector is likely to benefit INTA given its proven track record in building high-rise residential projects.

• As of end-December 2023, INTA’s unbilled order book stood at c.RM1.0bn, translating to 1.5x FY23 revenue. We also gather that the group targets to secure new contracts worth RM800mn in FY24. This could provide earnings visibility to the group for the next 3 years.

Valuation

• Rolling forward our valuation base year to CY25 earnings, we raise our target price to RM0.42 (from RM0.34), based on unchanged target PER of 10x. Maintain Buy on the stock.

Source: TA Research - 27 Feb 2024