KUALA LUMPUR: AmResearch is maintaining its Buy call on Ikhmas Jaya Group Bhd with a higher fair value of 85 sen a share.
The research house said on Monday it had pegged its 12 times price-to-earnings (P/E) to FY16F earnings per share (EPS).
Ikhmas Jaya reported 3Q net profit of RM7.4mil, bringing the nine-month earnings to RM23mil. Annualised, earnings are within the research house and market expectations. Earnings grew 45% on-year on the back of a 3% topline growth. Profit before tax margin expanded during the nine-month period to 14.7% from 10.1% a year earlier.
AmResearch pointed out the stronger margins were due to infrastructure jobs that yielded better margins, as well as the finalisation of the railway electrification and double tracking project during the quarter. Sequentially, earnings rose 7% while topline fell 1.4%.
“To account for the margin improvement, we have tweaked our numbers to reflect profit before tax (PBT) margins of 14% (from 11%-12% earlier) for FY15F-FY16F. This results in 8%-10% increases in net profit over the two years,” it said.
Last Friday, Ikhmas Jaya announced it has secured a RM161.1mil contract from MRCB Builders Sdn Bhd. This contract is for the substructure works of four towers (Phase 1A & Phase 1C) of the PJ Sentral development. The contract is for 20 months. Works will start in November 2015 and due to be completed by July 2017. The contract would contribute to Ikhmas Jaya’s FY16F and FY17 earnings.
“With the new win, Ikhmas Jaya has secured RM206mil worth of new jobs this year. This is within our new order book replenishment of RM300mil for FY15F (FY16F-FY17F: RM330mil each). We estimate Ikhmas Jaya’s outstanding order book to amount to RM380mil currently, which will keep the group busy over the next 20 months.
As at end-September, Ikhmas Jaya IJGB has used 80% (RM56mil) of the total gross proceeds raised from the IPO.
“All in, Ikhmas Jaya should benefit from ongoing infrastructure and property jobs under the 11th Malaysia Plan as well those initiated by the private sector. Tender book remains strong at RM3bil. We maintain Buy,” said AmResearch.
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