JAKS eyes water related an infrastructure projects
KUCHING: JAKS Resources Bhd (JAKS) is eyeing more contracts this year particularly in waterrelated and infrastructure segements.
Followingacompanybriefing,the research arm of Public Investment Bank Bhd (PublicInvest Research) yesterday said the group will be tendering for more jobs especially water-related and infrastructure projects.
“The company’s tender book was at RM2 billion for jobs such as highways, pipe laying, sewerage pipes and general construction,” it said in a note yesterday.
“For contracts related to pipe manufacturing, the company has offloaded the plants to focus on construction.”
In the meantime, the group’s outstanding orderbook was at historical high of approximately RM3 billion, with jobs such the non-technical engineering, procurement and construction (EPC) portion of the power plant project in Vietnam worth RM1.72 billion and the Sungai Besi-Ulu Kelang Elevated Highway (SUKE) worth about RM509 million.
Thus, it projected jobs replenishment of about RM400 million to RM500 million per year for JAKS from pipe laying, sewerage and upgrading of highways.
To be conservative, PublicInvest Research assumed replenishment rate of approximately RM300 million per annum and for property business, contribution from one of the group’s mixed development project, Pacific Star.
PublicInvest Research added JAKS has only one on-going project - Pacific Star located at Section 13, Petaling Jaya, Selangor that was launched in September 2014 and due for completion this year.
It gathered that the mixed development project is estimated to command an estimated gross development value (GDV) of RM1.1 billion comprising a nine-storey office and commercial podium, two blocks of office towers and three blocks of apartment.
Meanwhile, in the short to medium term, PublicInvest Research observed that JAKS’s earnings is expected to be driven by the company’s construction division.
The research firm opined that the company’s earnings will be contributed by the EPC of a power plant job in Vietnam.
To note, JAKS was one of the three Malaysian companies awarded the independent power producer (IPP) contract to build a power plant in Vietnam.
It observed that the group has roped in China Power Engineering Consulting Group Co Ltd (CPECC) as its equity partner to build a 1,200 megawatt (MW) coal-fired power plant in Hai Duong province, Vietnam.
PublicInvest Research observed the joint venture (JV) company has also secured US$1.4 billion in financing, or 75 per cent of project costs.
The works for the project has started in the second quarter of 2016 (2Q16) with the first phase to be completed by 2020.
Therefore, it expects the group’s near term earnings to be underpinned by the EPC job in Vietnam worth RM1.9 billion, and other local jobs such as SUKE highway, while recurring income is expected to be recognised by 2020.
Apart from that, PublicInvest Research believed JAKS’s earnings are expected to move markedly higher with its expected financial year 2014 (FY14) - FY17 earnings compound annual growth rate (CAGR) of 54.4 per cent and partly by property billings with strong earnings from the EPC job.
In the first nine months of financial year 2016 (9MFY16) ended September 2016, PublicInvest Research noted the group’s revenue from Vietnam project was at RM150.2 million, with RM30 million in net profit translated into a net profit margin of 20 per cent.
As for IPP segment, the research firm noted the contributions are only expected from 2020 onwards.
As for the group’s property division, PublicInvest Research gathered that JAKS is taking a cautious stance and will only focus on selling unsold units in hand with current lacklustre property market.
Having said that, PublicInvest Research remained upbeat about the group’s earnings especially from the Vietnam project which could provide near to mid term earnings visibility.
Hence, the research firm valued the company’s share price with a fair value of RM1.50 per share.