KUALA LUMPUR: AmInvestment Bank Research has maintained its forecasts, fair value of 80 sen and ‘buy’ call on Ikhmas Jaya Group following its latest contract win.
Ikhmas Jaya has secured a contract worth RM188.6mil from BBCC Development Sdn Bhd to carry out substructure works at the former Pudu Prison site where the Bukit Bintang City Centre is being built.
AmInvestment said its fair value was based on 13 times FY18 forecast earnings per share of 6.13 sen, at a slight premium to our 1-year forward target PE of 10-12x for small-cap construction stocks, to reflect a relatively less competitive piling segment vis-à-vis general contracting.
The research house said the latest contract has boosted Ikhmas’ year-to-date job wins to RM333.3mil and its outstanding order book to RM881.6mil.
“Our forecasts assume an orderbook replenishment target of RM500mil annually in FY17-19F, which is consistent with Ikhmas' job wins of RM495mil in FY16,” it said.
“We are positive on the latest development. We continue to like Ikhmas Jaya as it is a good proxy to the booming piling/foundation segment underpinned by current mega infrastructure projects such as MRT2, Pan Borneo Highway, SUKE and DASH, as well as those that are getting off the ground over the short to medium term such as LRT3, ECRL and KL-Singapore HSR,” AmInvestment said.
It added that ikhmas Jaya’s earnings visibility was good, backed by a sizeable order backlog which will keep it busy for the next 12-24 months. The entry barrier to the sector is high given the high costs of equipment and machinery as well as the limited availability of experienced operators.
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