Ekovest’s River of Life package win to help it take on similar projects in future

Ekovest Bhd (March 14, 95.5 sen)

Maintain buy with a fair value (FV) of RM1.35: The recent award to Ekovest Bhd of a RM100 million River of Life (RoL) work package solidifies our view that Ekovest is the key beneficiary of this Pemandu-driven initiative. All in, Ekovest has now secured four out of a total of five work packages rolled out from this project.

To recap, this RoL project has been identified as an entry point project under the National Key Economic Areas, which aims to revitalise the Klang and Gombak rivers into vibrant and liveable waterfronts. The project is divided into three parts which are: river cleaning — to clean the 110km Klang river stretch and to improve the water standard to recreational standard; river beautification works at the 10.7km tract along the Klang and Gombak river corridors (grouped into 11 precincts from Titiwangsa to Seputeh), revolving along major landmarks in the city centre; and land development — areas adjoining the river corridors to be developed to spur economic investment.

The recent RoL job won by Ekovest worth RM100 million is to undertake the river cleaning and beautification exercise in Taman Titiwangsa, which is expected to be completed within 78 weeks. This is the first construction job Ekovest has secured in financial year 2018 (FY18), boosting its outstanding order book to RM13 billion.

Meanwhile, for land development under the RoL project, the company has also launched its maiden waterfront project called KL Waterfront in 2017 (formerly known as KL River City project) which is located along the 10.7km tract river corridor (northern zone). The development, which sits on the Titiwangsa district and spans a 2.2km Gombak river stretch, is to provide a riverfront lifestyle and serene landscape for the public. The surrounding area of KL Waterfront project, which covers approximately 320 acres (129.5km), has huge potential for future developments for other developers including Ekovest. Ekovest, which owns several land parcels along the vicinity, plans to launch several property and mixed development projects with an estimated gross development value of RM6 billion.

We continue to believe that the company’s participation in the RoL project would give it the upper hand to take on similar projects in the future due to its proven track record. Additionally, the premium land banks that Ekovest owned within the KL Waterfront vicinity offer the company the opportunity for niche residential property and mixed development projects in the future that are easily accessible via land and water modes of transport.

We continue to like Ekovest for: its grossly unjustified market valuations, with its current share price trading a steep 50% discount to our base-case valuation of RM1.80, largely due to the market’s negative perception of its proposed acquisition of IWCity; its strong earnings visibility underpinned by a sizeable outstanding construction order book of RM13 billion; and its sturdy recurring income from toll concessions lasting till August 2069. — AmInvestment Bank, March 14

This article first appeared in The Edge Financial Daily, on March 15, 2018.

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