PESTECH INTERNATIONAL BHD

By Kenanga Research Outperform Target price: RM1.95

PESTECH’S wholly-owned subsidiary, Pestech Technology Sdn Bhd, has accepted a letter of award from Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd, under SIPP-YTL JV, for the turnkey EPC and maintenance of electrification system for the Gemas-Johor Baru electrified double-track at a fixed sub-contract price of RM399mil.

The project will take 26 months to complete by April 2021.

Pestech’s share price has been lacklustre for more than two years and it has finally secured this highly anticipated project, which was complicated earlier by the GE14.

As this announcement is only for the electrification portion, Kenanga Research understands that there are signalling and communication portions worth RM500mil yet to be announced.

With its partner Ansaldo, Pestech should have a better chance for the project as there is no other company which can do the signalling portion in the region.

This is the second contract Pestech has secured in FY19, totalling RM457mil and bringing total current order book to over RM2bil, which will keep them busy till 2021.

In the immediate term, the double-track’s signalling and communication jobs remain its top target while the potential projects East Coast Rail Link and KL-Singapore High-Speed Rail are the two main local electrification projects that Pestech can participate in the bidding.

“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,” said Kenanga Research.