PETALING JAYA: Mercury Securities Research remains bullish on Binastra Corp Bhd due to its robust construction order book and impressive high-single-digit percentage net margin.
The research house has a “buy” call on the company and a target price of RM2.20 at a price-earnings ratio of 18.4 times,
As of Dec 2, 2024, the group’s construction order book stood at RM3.7bil, which represents 3.9 times cover of its expected financial year 2025 (FY25) revenue.
The research house said the strong cover ratio reflects the group’s record high year-to-date order book replenishment of RM3.1bil and highlights steady project wins and stable contract flows from core clients.
Binastra is noted to have been in long-standing partnerships with three key clients – Exsim Development Sdn Bhd, Maxim Global Bhd
and Platinum Victory Sdn Bhd (PV) – for more than five years.
“Collectvely, we estimate planned project launches by these key clients over the next three years to be worth a combined gross development value of RM10bil,” the research house added.
Mercury said the company is well-positioned to leverage on the growth trajectory of its largest client Exsim, ensuring continued robust visibility for its construction order book.
This will be alongside the ongoing multi-phase projects in the Klang Valley where Binastra is already the existing contractor.
Binastra is also expected to secure two further contracts from Maxim for new developments on land in Bandar Permaisuri and Alam Damai.
“We estimate the potential contract value just from these existing projects alone could reach RM4.5bil over the next three years, assuming 55% construction cost,” it said.
Outside the Klang Valley, the research house said the strong revival of the property market in Johor would further improve Binastra’s order book as Exsim and Maxim are expected to ramp up their property launches in Johor in 2025, with Binastra most likely to be selected as the preferred contractor.
Additionally, data centres and engineering, procurement, construction and commissioning (EPCC) jobs will also add to its order book.
To date, the group has total contract wins of RM992mil in FY25 and these are expected to contribute significantly in FY26 and FY27, given the shorter construction period for data centres.
As for EPCC jobs, the research house said Binastra could be awarded an EPCC contract for the the latest phase of the government’s large scale solar initiative if the bid is successful.
“While this may not contribute meaningfully to Binastra’s order book, it nevertheless represents a strategic entry into the renewable-energy sector,” Mercury Securities Research said.
The group was also expected to take on other EPCC jobs in the environmental-related infrastructure space.
Looking ahead, Binastra was expected to have an annual order book replenishment of RM3bil for FY26 to FY27, underpinned by the stable flow of contracts from its clients.
The group’s margins remained stable in the 9% to 10% range during FY23 and FY24.
“We expect margins to moderate slightly to 8.7% and 9.4% for FY25 to FY27, reflecting a shift in its order book mix toward higher volumes of data centres and EPCC contracts, which typically carry thinner margins,” the research house added.
