Pestech’s contracts in hand to last till 2021
KUCHING: Pestech International Bhd’s (Pestech) total current orderbook could be slightly more than RM2 billion, which would keep them busy until 2021, analysts observed.
Following the long-awaited Gemas- Johor Baru (Gemas- JB) Double Track electrification project worth RM399 million, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) this is the second contract Pestech has secured in the financial year 2019 (FY19), totalling RM457 million and bringing total current order-book to slightly more than RM2 billion.
“We are positive as this is a muchneeded catalyst for Pestech which share price has been lacklustre in the past two years despite a commendable earnings record,” the research team opined.
It noted that Pestech’s share price has been lacklustre for the last two years and this highly anticipated project, which was complicated earlier by the 14th General Election (GE14).
“As this announcement is only for the electrification portion, we understand that there are still signalling and communication portions worth as high as RM500 million till yet to be announced.
“With its partner Ansaldo, Pestech should have higher chance for the project as there is no one else who can do the signalling portion in the region,” Kenanga Research added.
In the immediate term, the research team noted that the double-track’s signalling and communication jobs remain its top target while the potential projects East Coast Rail Link ( ECRL) and KL- Singapore HighSpeed Rail are the two main local electrification projects that Pestech could participate in the bidding.
“Should ECRL being cancelled eventually, the government will upgrade existing KTM line in the east coast which should be another alternative for Pestech to participate,” Kenanga Research said.
Meanwhile, it noted that prospects for transmission line and substation remain promising in Indochina, especially Cambodia, to propel the company’s earnings.
Overall, Kenanga Research maintained its ‘outperform’ call on the stock as well as its FY19 to FY20 estimates despite this new contract win as it is still within its contract wins assumption.
“We continue to like this niche utility infrastructure play for its earnings growth story. In fact, its valuation is no longer excessive following the lacklustre share price performance in the past two years while earnings momentum remains strong,” it added.