Ireka Corp Bhd (June 19, 67.5 sen)
Maintain buy with target price of RM1.06: Ireka announced that its wholly-owned subsidiary, Ireka Engineering & Construction Sdn Bhd has accepted a letter of award from UEM Land Holdings Bhd for the construction of a proposed mixed development project in Puteri Harbour, Iskandar Malaysia in Johor at a contract sum of RM268.6 million.
The project comprises: (i) one 35-storey block of serviced apartments (246 units) with a 5-storey car park and recreational facilities and swimming pool; (ii) one 16-storey office tower with a 3-storey car park; (iii) one single-storey commercial block; and (iv) a single-level car park in the basement.
The contract is for a period of 24 months, commencing on Aug 1, and completing on July 13, 2014. The management expects the project to contribute to group earnings from FY13.
The new contract is timely in view of the group's depleting outstanding construction order book, which stood at about RM240 million as at end-April 2012.
However, we are not adjusting our FY13 to FY15 forecasts as the new award is within the new contract wins we have assumed to enable the group to achieve forecast annual construction billings of about RM400 million per year.
In addition to new contract wins, we continue to look forward to significant profit contributions from the four property development projects (with an estimated total gross development value of RM1.4 billion) the group is working on, with two expected to commence in 2H12.
Ireka's share price has recovered some ground lately but is still trading at a low CY13 price earnings ratio of 5.4 times and 39% of our estimated revalued net asset value of RM1.76. We maintain our "buy" call. — Affin Investment Bank, June 19
This story appeared in The Edge Financial Daily on June 20, 2012.