• BNASTRA’s 9MFY25 earnings of RM65m were in line with our and consensus expectations, representing 73% of both full-year forecasts

• BNASTRA is targeting RM5bn new wins in FY26, supported by projects pipeline from its key clientele in Klang Valley and Johor

• Reiterate BUY rating with unchanged target price at RM2.30

Result met expectations

BNASTRA’s 3QFY25 core earnings of RM24m (+115% YoY) brings 9MFY25 core earnings to RM65m (+155% YoY), within both our and consensus estimates, representing 73% of both full-year forecasts. 9MFY25 saw higher revenue of RM676m (+147% YoY), driven by higher progress recognition from ongoing projects. Order book more than doubled to an all-time high of RM3.7bn, from RM1.5bn as of end 3QFY24. 9MFY25 EBITDA margin declined marginally by 0.2ppt YoY to 13.8% due to higher mechanical and electrical (M&E) outsourcing works for EXSIM data centre (DC).

Robust order book to sustain earnings, target RM5bn new wins in FY26

3QFY25 revenue increased 15% QoQ to RM266m, driven by better recognition from ongoing projects and the commencement of five new projects with a combined value of RM1.4bn. However, the EBITDA margin declined by 0.8ppts due to higher progress recognition from EXSIM DC, which carries a lower margin. As a result, 3QFY25 earnings growth lacked revenue growth at 6% QoQ. Looking ahead, we expect sustained earnings momentum in 4QFY25, supported by its robust order book of RM3.7bn after securing RM3.1bn new wins YTD. Additionally, the management has set its sights on RM5bn target new wins in FY26, with replenishment opportunities stemming from its key clientele in Klang Valley and Johor. If this materialises, we see a potential upside to our FY26-27E earnings as our replenishment assumption remains conservative at RM3.5bn annually for FY26-27E.

Reiterate BUY with TP of RM2.30

We make no changes to our earnings forecast. We reiterate our BUY call with an unchanged target price of RM2.30, based on a target 18x multiple on FY26E EPS. We like BNASTRA for its strong competitive advantage as a preferred contractor with key clients and superior profit margins. Given its strong three-year profit CAGR of 64%, BNASTRA is trading at an undemanding forward 14x PE. Key downside risks include slower-than-expected order book replenishment, unforeseen delays, and project margin cost pressure.

Source: Philip Capital Research - 20 Dec 2024