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Ikhmas Jaya Group Bhd (Jan 5, 59.5 sen)
Maintain buy with an unchanged target price (TP) of 76 sen: Ikhmas Jaya Group Bhd has announced that it bagged a construction and completion of piling and substructure works from Symphony Crescent Sdn Bhd worth RM37.74 million for a small office home office unit located at Bandar Sunway, Mukim Damansara, Selangor.
We understand that the duration of the mentioned contract takes 15.5 months, which is expected to commence on Jan 3, 2017 and to be completed by April 16, 2018. Therefore, earnings will account beyond the first quarter ending March 31, 2017 (1QFY2017). The current outstanding order book stands at RM616 million after taking into account this newly clinched contract. The outstanding order book provides an earnings visibility of 1.96 times FY2015 earnings assuming a net profit margin of 8%.
We retain our earnings forecasts for FY2016 and FY2017 as this contract win falls within our target order book of RM400 million for FY2017.
We derived our valuation by pegging at 13 times FY2016 price-earnings ratio. Despite the recent earnings cut, we still maintain our positive view on the group as bored pilling and fundamental works still remain vibrant.
We believe the group will resume its growth trajectory in FY2017 given more construction works in the pipeline, especially under government initiatives such as the Economic Transformation Programme, transit-oriented development and the corridor and city transformation programmes. — JF Apex Securities, Jan 5
This article first appeared in The Edge Financial Daily, on Jan 6, 2017. Subscribe to The Edge Financial Daily here.
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