Binastra’s latest construction win signals clientele diversification efforts, say analysts

• However, analysts are divided on the margins from new clients, at least in the initial stage, compared with the 9%-10% enjoyed by the company through relationship with key clients such as EXSIM Development Sdn Bhd, Maxim Global Bhd (KL:MAXIM) and Platinum Victory Sdn Bhd.

KUALA LUMPUR (June 12): Binastra Corporation Bhd’s (KL:BNASTRA) RM268 million apartment construction job win from new client TNJ Development Sdn Bhd adds to ongoing efforts to diversify beyond its three core recurring customers, said analysts.

However, analysts are divided on the margins from new clients, at least in the initial stage, compared with the 9%-10% enjoyed by the company through relationship with key clients such as EXSIM Development Sdn Bhd, Maxim Global Bhd (KL:MAXIM) and Platinum Victory Sdn Bhd.

“We believe Binastra is well-positioned to secure additional contracts from CPI Land Sdn Bhd’s RM1 billion gross development value (GDV) pipeline,” said TA Research in a note. CPI Land is the parent of TNJ Development.

“In our view, this initial engagement may carry a lower project margin, likely a strategic trade-off aimed at enhancing future tender prospects within the client’s development portfolio,” said TA Research.

Philip Capital projects a 6% net profit margin for the project, “reflecting a greater reliance on subcontracting as Binastra preserves internal capacity for its expanding Johor project pipeline”.

Separately, Mercury Securities sees Binastra’s margin from the project “to remain in line” with its past high-rise projects, “supported by its effective construction cost management through its value engineering initiative”.

The contract has increased Binastra’s year-to-date job wins to RM976 million, and outstanding order book to RM4.3 billion.

In a separate note, RHB Research said that this provides earnings visibility for the next four years.

“We believe it’s likely [that] job wins will stem from the southern region. For instance, EXSIM Development has a few other land parcels in Johor Bahru near the New York Hotel, and at Jalan Lumba Kuda, and projects there could fetch a cumulative GDV of over RM3 billion, or a potential construction value that may exceed RM1.5 billion,” the research house said.

All five research firms actively covering Binastra have “buy” calls on the stock, with target prices between RM2.02 and RM2.09, for an average of RM2.22, Bloomberg data showed.

The counter traded unchanged at RM1.79 at the time of writing on Thursday, giving it a market capitalisation of RM1.96 billion. The stock is up a little over 2% this year.

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