This article first appeared in The Edge Financial Daily on April 23, 2018

Ikhmas Jaya Group Bhd
(April 20, 39 sen)
Maintain buy with an unchanged target price of 55 sen: Ikhmas Jaya Group Bhd has received a letter of award of RM101.8 million from the natural resources and environment ministry/irrigation and drainage department to undertake the “Rancangan Tebatan Banjir Sungai Choras/Sungai Salad dan Struktur-strucktur serta Kerja-kerja Berkaitan” project.

We learnt that the duration of the above-mentioned project is about 36 months and the executed date will be determined at a later date.

Year to date, the group has successfully secured total contracts of RM399.4 million, accounting for 79.8% of our RM500 million estimated order-book replenishment for financial year ending Dec 31, 2018 forecast (FY18F).

The current outstanding order book stands at RM1.03 billion after taking into account this newly secured contract. As such, we believe that the outstanding order book could provide earnings visibility of 5.4 times FY17 earnings assuming a net profit margin of 7.5%.

We retain our earnings forecast for FY18 and FY19 as the contract win falls within our target order book of RM500 million for FY18F.

Major risk to our earnings forecast is any unforeseen delay in execution, hence impacting our recognition of billing progress.

We like the group for its sizeable outstanding order book and strong contract win. We derived our valuation, which is pegged at 10.3 times FY18F price-earnings (+1 SD), based on earnings per share of 53 sen. — JF Apex Securities, April 20