The research house remains bullish on Advancecon with expectations of ongoing activity throughout MCO3.0 as construction is classified as an essential service.
In subsequent quarters, further support for earnings is expected to come from the execution of the group's remaining construction orders worth RM812mil.
Reiterating its "buy" call, RHB said current valuations remain attractive and maintained its projections for now pending a meet-up with management next week.
"We partly derived our TP by pegging FY22F EPS to 12x P/E.
"The multiple represents its 5-year mean baseline – which is warranted, as it has a healthy replenishment rate assumption of MYR300m and MYR350m per year for FY21 and FY22.
"We also imputed the LSS4 project win into our valuation (worth MYR0.05, assuming a WACC of 4.9%)," said RHB.
Advancecon announced last Friday that 1Q21 core earnings of RM600,000 after excluding extraordinary items came to only 4% of RHB's and consensus full-year estimates.
The group's operating margin contracted 1.7 percentage points from the same period last year to 5.7%, due also to the lower machine utilisation rate as its client was waiting for approval on a project from authorities.
Its green division recorded a RM10,000 profit as compared to RM10,000 loss in 1Q20 due to construction revenue from solar projects.
"Management expects this segment to provide a recurring income stream that will complement its core business and civil engineering unit.
"Over the next 21 years, ADVC aims to book at least c. MYR1m in net profit from this segment.
"Note that the recent win of its large-scale solar (LSS4) project has the potential to boost net profit by 13% YoY in FY24F," it said.