KUALA LUMPUR: JF Apex Research expects improved earnings for SCH Group Bhd in FY18 as demand rises for quarry based materials for use in major property development, construction and infrastructure projects.
The research house said on Monday that it had witnessed the sign of earnings recovery for SCH Group as its main product, quarry M&E recorded a sales surge in the latest quarter, soaring four folds on-year and doubling on-quarter.
“Moving forward, we envisage the Group to deliver better FY18 earnings as more quarrying activities operations will be required to meet the demand for quarry based materials for use in major property development, construction and infrastructure projects,” it said in a note.
The research house added that with the stabilisation of the US dollar and ringgit exchange rates, it anticipates the quarry operators to re-embark on their capex.
It noted that SCH could benefit from the take-off of several mega infrastructure projects such as MRT2, LRT3, Pan Boneo Highway, SUKE and upgrading road works from Klang Container Terminal – North Port as well as property projects particularly affordable housing segment with projects such as PR1MA and PPA1M.
“Also, the Group pins its hopes on new business venture, the sales of asphalt mixing plant, to further strengthen its current business,” it said.
JF Apex Research maintained its Hold call on the counter with an unchanged target price of RM0.20 due to its steep valuation.
“We believe that current share price has factored in the better earnings outlook to a certain extent.
“However, any significant positive earnings surprise could prompt our earnings upgrade and hence lifting our valuation,” it said.
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