This article first appeared in The Edge Malaysia Weekly on December 11, 2017 - December 17, 2017

ACE Market-listed small-cap builder Inta Bina Group Bhd is actively bidding for new construction projects locally as it aims to grow its market capitalisation to RM300 million in the next one to two years.

Managing director Paul Lim Ooi Joo says the group’s tender book stood at a record high of RM2.91 billion as at Oct 30 this year, out of which RM1.72 billion is pending, RM274 million has been secured and the remaining RM915.4 million was unsuccessful.

It has tendered for projects from Gamuda Bhd, UEM Sunrise Bhd, Sunway Bhd, Mah Sing Group Bhd, GuocoLand (M) Bhd, S P Setia Bhd and Berjaya Land Bhd, among others.

“During the good times in 2013, our success rate was as high as 33%. Subsequently, it dropped to about 20% in 2014, before declining further to slightly more than 10% this year. My personal target for 2017 is 15%, but we would be happy if we could eventually achieve 10%,” Lim tells The Edge in an interview.

Inta Bina’s tender book stood at RM1.56 billion in 2014, RM1.42 billion in 2015 and RM2.54 billion in 2016.

In terms of growing its market capitalisation to RM300 million, deputy managing director Teo Hock Choon says the group is “not too far away” from reaching this target.

“The company is still growing, and we should be able to achieve that within the next one to two years,” he adds.

Since its debut on the ACE Market of Bursa Malaysia on May 25, Inta Bina has seen its shares rise 36% to close at 34 sen last Wednesday, giving it a market capitalisation of RM182 million.

The contractor has more than 25 years of experience in building residential, commercial, industrial and leisure properties.

To date, it has completed more than 110 building construction projects, with a total contract value of more than RM2 billion — mainly in the Klang Valley and Johor.

Inta Bina’s existing clients are largely locally listed developers such as Eco World Development Group Bhd, Engtex Group Bhd, Paramount Corp Bhd, Plenitude Bhd, Selangor Dredging Bhd and Tropicana Corp Bhd. Other notable clients are Perdana ParkCity Sdn Bhd and Mitraland Group Sdn Bhd, as well as Singapore-listed Lum Chang Holdings Ltd.

Aiming to emulate Kerjaya Prospek

It is worth noting that Inta Bina has passed two major milestones — its revenue surpassed the RM100 million mark for the first time in 2010, followed by the RM200 million mark two years later.

For the nine months ended Sept 30, 2017, the group reported a net profit of RM10.89 million on revenue of RM220.9 million. This translated into a net margin of 4.9%.

Going forward, Lim says Inta Bina is aiming for a steady revenue growth of about 15% to 20% per annum. The group also hopes to improve its net margin to 6% to 7% — higher than the industry average of below 5% — by bidding for more high-value contracts and higher-margin jobs.

Interestingly, Lim is not shy about stating that Inta Bina intends to emulate the success of Kerjaya Prospek Group Bhd in maintaining fat profit margins.

“Kerjaya Prospek saves a lot of money because it has plenty of cash, which allows it to obtain a better discount when purchasing raw materials [by cash]. Its net margin is about 12% to 13%, whereas ours is only about 5%. So far, it is the best in the construction industry. We should learn from the company,” he says humbly.

Teo points out that Inta Bina’s earnings visibility will be backed by its unbilled order book of RM634.7 million as at Sept 30 this year. Its notable ongoing projects include Gravit8 by Mitraland and Eco Majestic by EcoWorld.

“Our order book remains strong despite the slowdown in the property market, as we have managed to get some new clients on board. Besides, some developers are still doing very well, so we are quite fortunate to be able to ride the wave of their success,” he explains.

Inta Bina has secured a RM192 million contract from Gravit8 — a two-block apartment project in Klang, Selangor — and an RM89 million contract from Eco Majestic, a two-block medium-cost apartment project in Semenyih, Selangor.

In a report dated Nov 20, Rakuten Trade head of research Kenny Yee Shen Pin highlights that Inta Bina’s recent inclusion in the shariah-compliant securities list and potential move to the Main Market of Bursa may see renewed interest in the stock.

“Inta Bina’s unbilled order book remains healthy [and will keep the company] busy until 2019. Management expects it to touch RM800 million by next year,” he writes.

Yee says the group’s net margin remains stable at around 5% and is expected to improve with the utilisation of the industrialised building system at its affordable housing projects.

“We expect its earnings per share to chart double-digit growth of around 20% for FY2018,” he adds.

Rakuten Trade has a “buy” call on Inta Bina with a target price of 39 sen — representing a potential upside of 15% — based on a price-earnings ratio of 12 times for the financial year ending Dec 31, 2018 (FY2018).

Venturing into infrastructure

Teo reveals that Inta Bina has started venturing into infrastructure-related projects — albeit on a small scale — in a move to diversify its income stream.

“We used to outsource the roadworks and drainage works at our housing estates to other companies but now, we are trying to do them ourselves. We are still learning and gaining experience.”

According to him, the group is also making an effort to participate as a subcontractor in infrastructure projects undertaken by IJM Corp Bhd and Sunway.

“We are tendering for some mass rapid transit station projects. This is something that we have never done before, so we have to learn from them. Infrastructure could be another income source for us in the future. It is good to diversify,” says Teo.

Of the RM26.76 million raised through its listing in May, RM5 million (18.68%) has been set aside for capital expenditure to purchase as well as replace various machineries and equipment; RM9 million (33.63%) will be used to repay bank borrowings; RM9.56 million (35.73%) will go to general working capital to finance its day-to-day operations; and the balance RM3.2 million (11.96%) will be utilised to cover its listing expenses.

While the initial public offering has opened up growth opportunities for Inta Bina, Lim is aware that there will be challenges along the way.

“In the past years, we had to invest our profits in expansion. But today, the banks are more willing to lend us money, and we can also get funding from the public, so it enhances our cash flow,” he says.

“However, being a listed company, we are now accountable and answerable to the public. I lack corporate experience and stock market knowledge, so meeting with the media and fund managers, giving speeches, complying with corporate governance — all these things are still very new to me, so I have to learn,” he concludes.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.