KUALA LUMPUR (June 9): Hong Leong IB Research has initiated coverage on Protasco Bhd with a “Buy” rating and target price of RM1.20 and said strong cash flow generation from 2 concessions and 4 long term contracts for road maintenance.

In a note today, the research house said renewal of Sarawak concession (expiring Feb 2018) likely; lower stake from 100% to 30% but road length may double.

It said Protasco was a potential election beneficiary as road maintenance works increases running up to the polls.

“Construction orderbook of RM601 million (2x cover ratio); bidding for RM4 billion in new jobs.

“Property sales falling since FY14 but set to reverse this year with RM830 million in new launches and RM115 million inventories.

“Expect earnings to fall 20% this year but rebound by 37% and 15% for FY18-19.

“Initiate with Buy, TP: RM1.20. Maintenance business provides a floor to downside via decent dividends (FY17-18 yield: 5.6% and 7.7%),” it said. — theedgemarkets.com

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