This article first appeared in The Edge Financial Daily on December 20, 2017

Chin Hin Group Bhd 
(Dec 19, RM1.17)
Maintain outperform rating with an unchanged target price (TP) of RM1.67 per share: Chin Hin Group Bhd announced the securing of an RM238.3 million contract through 70%-owned Metex Modular Sdn Bhd for the construction of an integrated worker complex with comprehensive facilities in Pengerang, Johor. The works will take a year, to be recognised in FY18. Given the recent temporary setback in its wire mesh division, this development is certainly a very much welcomed and a significant one in its evolution towards being a solution provider from its current core strength as an integrated distributor and manufacturer of building materials. We gather that pre-tax margins are about 20%, though we take a conservative stance in assuming 10%, given that this is the group’s maiden foray. FY18 earnings per share should increase by two sen (+19.2%), resulting in a raised TP of RM1.67 (RM1.40 previously). We continue to like Chin Hin’s growth prospects and affirm our “outperform” call, remaining assured of its strong growth prospects in 2018 and beyond, underpinned by contributions from its capacity expansion in the autoclaved concrete and precast concrete businesses, growing contributions from recent earnings-accretive acquisitions, and high chances of securing of more contracts by Metex Modular.

The contract is for the construction of an integrated worker complex in Johor, awarded by Saujana Vision, a company listed as a contractor of construction works. Running for only a year effective Jan 1, 2018, contributions are expected to be recognised in FY18. Prefabricated Prefinished Volumetric Construction (PPVC) is a method whereby free-standing volumetric modules are manufactured/constructed and assembled in an accredited fabrication facility, and then installed in a building under building works. PPVC is reportedly a game-changing technology, which significantly speeds up the construction process. Metex Modular Sdn Bhd was recently incorporated for this purpose, allowing the group to tap on various internal resources and delve into the Industrial Modular Building System space in a bigger way, in line with the government’s call for mandatory usage of Industrialised Building Systems by 2020. — PublicInvest Research, Dec 19