CIMB Research retains Add for Destini, higher target price

KUALA LUMPUR: CIMB Equities Research is retaining its Add for Destini Bhd and raised the target price from 74 sen to 80 sen.

It said on Monday it was positive on Destini after it had secured a letter of award from the Ministry of Defence (MinDef) for a RM138mil contract to provide maintenance, repair and overhaul (MRO) services and to supply safety and survival equipment to the Royal Malaysian Air Force (RMAF).

It said this was in addition to an existing RM98.2mil MRO contract. 

“This is a positive surprise to us as the company had at end-2016 already secured from MinDef an extension to its contract to provide MRO services to the RMAF,” it said.

The three-year RM98.2mil contract will run from October 2016 to October 2019.  

“We understand that Destini is currently providing around RM100mil MRO work for RMAF annually although the RMAF contract is valued at only RM98.2mil over three years. 

“With the award of an additional RM138m, we believe Destini should be generating even more RMAF MRO revenue from now on.       

“With this development, we raise our assumption for RMAF MRO services revenue from RM100mil annually to RM130mil annually from this year onwards. We estimate that the pretax profit margin for MRO work is attractive for Destini, at 20%-25%,” it said.

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