Iris Corporation Bhd
(March 5, 29.5 sen)
Maintain hold call with higher target price (TP) of 36 sen. This is based on an unchanged price-to-earnings ratio of 20 times and calendar year 2015 earnings per share of 1.8 sen.

Continue to expect an improved performance ahead based on: resumption of works in Tanzania and Republic of Guinea; improved contract flow for Rimbunan Kaseh (RK) and Sentuhan Kasih (SK) projects; completion of upgrading works for waste incineration power plant in Phuket; ramp up of production in its food waste to fertiliser plant in China; and contributions from its Gerehu Heights project.

Overall performance has been let down by losses due to a lack of scale in RK and SK projects.

This was attributed to a slow award of projects by both the state government and Felda.

However, recent showings displayed narrowing losses from the segment.

For 2014, the group has secured a combination of five RK and SK projects. This should contribute positively as it looks to turn around the segment.

The soft launch of Gerehu Heights was met with positive responses as 50 houses were sold within two days.

Sold in phases over the next 1.5 years, the township will have a total of 300 housing units.

Potential gross development value is estimated at RM300 million with gross margin of between 20% to 30%. Positive contributions are expected in financial year 2016.

Also, expect a ramp up in production for its food waste to fertiliser plant in China. Currently, incurring losses, it operates at only one-third of its capacity.

It recently received a permit from the local government to secure waste from other regions in the area. The move will allow the plant to achieve the scale necessary to generate positive contributions. — TA Securities Research, Feb 26

This article first appeared in The Edge Financial Daily, on March 6, 2015.