KUALA LUMPUR: JF Apex Research has recommended investors to subscribe to Ikhmas Jaya Group Bhd with a fair value of 70 sen, it said in a note on Monday.
"We peg Ikhmas Jaya’s valuation at PER of 12 times (with FY15 EPS of 5.8 sen/share), which is on par with other listed piling and foundation work contractors’ average forward PER.
It believed that the PER of Ikhmas Jaya could match its peers upon listing as the group is trading at 9.8 times 2015F PE based on listing price of 57 sen, as compared to Econpile and Pintaras Jaya
which are currently trading at 13.3 times and 12.1 times 2015F PE respectively.
"We anticipate more construction works in the pipeline that would render job opportunities for operators in the pilling and construction segments locally in coming years in view of government initiatives in the 11th Malaysia Plan, ETP, and the Corridor and City Transformation Programme," it said.
The research house said Ikhmas Jaya is an established bore piling specialist with a track record of about 12 years.
The Group is able to propose alternative design options to its customers in lower costs and without compromising quality and functionality. Hence, the ability to propose lower cost solutions provide competitive advantage for the group to win tenders for bore piling works.
It said the group has its own in-house technical professionals including civil, structural and geotechnical engineers who involve in the technical design of piling and foundation works, as well as construction of bridges and buildings. With the involvement of design scopes, the group is also able to command better margin for the jobs secured.
It noted that Ikhmas Jaya has been enjoying robust earnings growth for the past few years with 4-year Compound Annual Growth Rate (CAGR) of 37%.
"Looking forward, Ikhmas Jaya has an outstanding order book of RM346mil coupled with a total tender book amounting to RM4.2bil.
"Based on historical success rate of 15-20%, we expect Ikhmas Jaya to bag RM630-840mil new jobs in coming months to further replenish its existing order book," it said.
JF Apex said Ikhmas Jaya owns a diversified M&E to support its core business activities which enables it to undertake sizeable and various type of piling jobs at the same time without any capacity constraint, coupled with lower cost in respect of rental savings and mobilisation costs.
"Upon listing, net book value of Ikhmas Jaya’s M&E will stand at approximately RM90mil, which is comparable to other significant piling contractors in town like Econpile (RM107.8mil) and Pintaras Jaya (RM86.5mil)," it said.
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