Binastra may be preferred contractor for property projects worth RM10b, Mercury starts coverage on 'buy'

• Relationships with key clients Exsim Development Sdn Bhd, Platinum Victory Sdn Bhd and Maxim Global Bhd, which stretches over five years, could yield potential contracts worth some RM4.5 billion for the construction firm, Mercury Securities said in its initiation note on Binastra.

KUALA LUMPUR (Jan 6): Binastra Corporation Bhd (KL:BNASTRA) may be the preferred contractor for property projects worth RM10 billion in gross development value over the next three years, Mercury Securities said.

Relationships with key clients Exsim Development Sdn Bhd, Platinum Victory Sdn Bhd and Maxim Global Bhd, which stretches over five years, could yield potential contracts worth some RM4.5 billion for the construction firm, Mercury Securities said in its initiation note on Binastra.

“We like Binastra for its robust orderbook, driven by long-standing clients with vibrant growth prospects and superior profit margin,” Mercury Securities said in starting its coverage with a “buy” call and target price of RM2.20.

Mercury Securities joins four other research houses covering Binastra, which all also have the stock on “buy” calls. The average consensus target price is RM2.19, according to Bloomberg, implying potential return of 24% over the next 12 months from its last price.

Shares of Binastra have more than doubled in prices in 2024, along with its surging quarterly profits and expanding orderbook. The company has about RM3.7 billion in outstanding jobs on hand, after securing more than RM3 billion contracts last year.

“Following their recent land-banking activities in Johor, we expect Exsim and Maxim to ramp up new property launches in the state in 2025, with Binastra likely to be selected as the preferred contractor, given that those projects will be high-rise developments,” Mercury Securities said.

For the current financial year ending Jan 31, 2025 (FY2025), Binastra is expected to rake in a net profit of RM89.1 million, compared to RM41.6 million a year earlier, according to the research house’s estimates.

Further, Binastra has consistently achieved net margins of 9%-10%, outperforming industry peers, thanks to the client relationship that helps secure “favourable contract terms and ensure prompt payments, reducing working capital needs,” Mercury Securities said.

Net margins, however, could normalise to 8.7%-9.4% in FY2025-FY2027, mainly due to the increase in data-centre, as well as engineering, procurement, construction, and commissioning (EPCC) works, which carry lower margins than its typical high-rise construction, the house noted.

In 2024, Binastra secured RM992 million in data-centre projects, and RM223 million in EPCC jobs.

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