AmWatch - Ikhmas Jaya : Meets expectation at the halfway mark BUY, 1 Sep 2015

STOCK FOCUS OF THE DAY

Ikhmas Jaya : Meets expectation at the halfway mark    BUY

We maintain BUY on Ikhmas Jaya Group Bhd (IJGB) with an unchanged fair value of RM0.70/share, pegged at 12x FY15F PE. For the 1H, IJGB’s net profit jumped 76% to RM15mil from RM9mil a year earlier. This on the back of an 11% topline growth to RM140mil. Its 1H performance met expectations – making up 50% of our full-year forecast. No dividend was declared.

Sequentially, topline fell 16% due mainly to the decrease in work done for two projects – an infrastructure project and a piling job. Similarly, net profit fell 18% during the quarter. Net margin was maintained at 11% during the quarter (vs. 11% in 1Q). Nevertheless, on a cumulative basis, net margin was a marked improvement at 11% vs. 7% a year earlier. We believe this is due to recognition of jobs that yielded better margins in 1HFY15. Improving margins in the 2H will be a positive surprise, but we maintain our net margin assumption of 8% for now.

Looking ahead, earnings will be supported by its strong order book of ~RM300mil. While a bulk of these will be completed by year-end, prospects remain bright with a tender book of ~RM3bil. We understand that management is expected to bid for RM1bil-RM2bil worth of jobs in 2H. IJGB may be in a good position to secure jobs given its diversified expertise in piling and foundation works, superstructure, bridge construction and prefabricated building system (PBS).

Our new order book replenishment of RM300mil for this year is maintained (RM330mil each for FY16F-17F) based on a conservative win rate of 10%. YTD, it has replenished RM29mil. We maintain our 40% earnings growth forecast for this year (supported by its outstanding order book), before it tapers off to 8%-10% over FY16F-17F. Our 12x PE target is supported by earnings CAGR of 19% over the next three years. Any job announcement should help to lift its share price – currently trading at 10x PE. Maintain BUY. 

Others :

IHH Healthcare : Buys 74% stake in India’s Global Hospitals           HOLD

Lafarge Malaysia : Tougher outlook ahead            HOLD

Jaya Tiasa : Still not out of the woods for oil palm              HOLD

CIMB Group : 2Q15 results below expectations HOLD

Bonia Corporation : A softer FY15             HOLD

Ann Joo Resources : One bar too high    HOLD

RHB Capital : Reframed strategy for the longer term        HOLD

Ta Ann Holdings : 2Q15 beats expectations          HOLD

Banking Sector : Noticeably tighter adjusted liquidity in July 2015(MGS) NEUTRAL

Banking Sector : Significant slowdown in deposit in July 2015 (loans)        NEUTRAL

TH Plantations : Boosted by fair value gain on timber assets again             SELL

QUICK TAKE

Plantation Sector : Newsflow for week 24 to 28 August  OVERWEIGHT

NEWS HIGHLIGHTS

Logistics Sector : NCB’s gateway business gives it an edge

Airlines Sector : Fresh start for national carrier

DISCLAIMER:

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