EITA RESOURCES BHD

By CIMB Research Add Target Price: RM2.52

EITA Resources Bhd has secured orders from the Light Rail Transit 3 (LRT3) project to supply lifts and escalators for Package GS06 to Package GS10 worth RM70.6mil, Package GS01 to Package GS05 and Package Underground for RM27.8mil and Package GS6 to Package GS10 and Package TD2 for RM27.8mil.

These add up to a total of 106 units of escalators and 95 units of lifts, which will be supplied and installed for three contracts amounting to RM126.2mil for the LRT3 project.

CIMB Research said it is positive on the development and did not expect EITA to win such a large job from LRT3 so soon after last week’s announcement that it had secured an RM80.6mil escalator contract for Package ESC (E) for Light Rail Transit Line 3 (LRT3) from Bandar Utama to Johan Setia, involving the installation of 114 escalators.

The research house pointed out that this month alone, EITA had secured a total RM206.8mil worth of jobs from the LRT3 project, the largest infra job ever for the company.

CIMB said EITA’s orderbook was at a record high of RM276.6mil, if it included the RM69.8mil job secured from the MRT2 project.

Coupled with its existing outstanding RM150mil orderbook from its other divisions, CIMB said EITA’s total outstanding orderbook is now at a record RM426.6mil, the highest ever for the company.

As at end December 17, EITA was in a RM36mil net cash or 28 sen net cash per share position. Given the LRT3 job wins, CIMB reckoned that EITA might raise funds from the equity market in the near future for working capital needs.

However, CIMB said EITA’s work could start on 2020 or even 2021, depending on when the main construction works are completed.

It explained that given EITA’s experience from the MRT underground jobs completed in 2016-17, EITA is well prepared to do the underground works for the LRT3 project.

CIMB remained its “add” call on EITA and maintained its earnings per share forecasts and target price based on 2019 forecast 12 times pric to earnings ratio (PE), which was a 20% discount to its target 15 times PE for construction sector.

It said the discount reflected its small market cap and indirect exposure to the sector.

The recent contract wins could catalyse its share price, but failure to win more infra jobs was a downside risk to its call.