HLIB Research estimates OSK’s earnings for FY22, FY23 and FY24 to hit RM379.9mil, RM422.9mil and RM461.2mil, respectively.
PETALING JAYA: Hong Leong Investment Bank (HLIB) Research expects OSK Holdings Bhd
’s financial year 2022 (FY22) to FY24 core earnings to grow at a compounded annual growth rate of 10.2%, on the back of a strong property launch pipeline, stable loan growth in capital financing, capacity expansion and robust growth.
The research house estimates OSK’s earnings for FY22, FY23 and FY24 to hit RM379.9mil, RM422.9mil and RM461.2mil respectively.
It added that OSK’s vertically-integrated property business allows the group to manage quality and execution time to market that allows the group to have brisk project turnover rate and cash flows.
OSK has a total land bank of 1,930 acres in Malaysia and Australia worth a gross development value (GDV) of RM13.7bil as at Oct 31, 2022.
Some 84% of the remaining GDV would come from Malaysia and the balance 16% from Australia, HLIB Research noted.
OSK’s current share price is 93.5 sen and HLIB Research has a “buy” call and target price (TP) of RM1.42 on the group.
The TP is based on a 40% discount to its sum-of-parts derived value of RM2.37 a share.
“OSK has successfully transformed its business from an investment banking firm to a well-diversified conglomerate.
“We believe OSK, with its resilient business model headed by a capable management team, should be able to sail through the different economic cycles,” the research house added.
Additionally, the research house said OSK’s 10.22% stake in RHB has a market value of RM2.47bil, which exceeds its market cap (128.3%).
“The shareholding provides the group with recurring dividend income and allows the group to secure loans (through share pledge) to expand its capital financing business.
“We believe the significant discount to RHB’s stake is unjustified, especially given that its other core segments are currently profitable and doing well, suggesting a gross mispricing of the group.”
HLIB pointed out that the group’s exposure to the banking sector via RHB had provided it with a counter cyclical bullet to the property sector.
“The banking sector is relatively more defensive and resilient in nature,” HLIB noted, adding the property sector is highly cyclical and could experience a downturn that can last for many years.
Separately, HLIB said the group’s power cables segment is poised to grow through capacity expansion and growing power cable demand arising from increase in infrastructure spending.
Its industrialised building system (IBS) segment should benefit from an anticipated structural increase in IBS construction adoption arising from labour shortage and cost increase as well as national policies to reduce foreign labour reliance.
