Hot Stock Ahmad Zaki rises 5% on winning RM80m arbitration claims

Hot Stock Ahmad Zaki rises 5% on winning RM80m arbitration claims
Business & Markets 2013
Written by Kamarul Anwar of theedgemalaysia.com
Tuesday, 30 July 2013 12:39

KUALA LUMPUR (July 30): AHMAD ZAKI RESOURCES BHD [] (AZRB) was up by as much as five sen or 5% in morning trades after the engineering and CONSTRUCTION [] group announced it will receive arbitration claims of 92.57 million Saudi riyal (RM79.89 million).

At 12:05 pm, AZRB was traded four sen or 4% higher at RM1.04. A total of 1.46 million shares changed hands.

Yesterday, the group said it had won the arbitration proceeding against Alfaisal University and King Faisal Foundation. The arbitration was initiated after Alfaisal University sent a letter to AZRB in 2010 alleging a breach of contract due to delays in construction of Alfaisal University Phases 1 and 2 campus project, which was undertaken by AZRB.

According to an Alliance Research note today, funding issues on the part of King Faisal Foudation and various changes in work orders had caused delays in the campuses’ construction.

Alliance, along with RHB Research, maintained their “buy” calls on AZRB today. They have also kept their target prices of RM1.22 and RM1.47 respectively.

“We are positive on the result of the arbitration proceedings. The arbitration award of 92.6 million Saudi Riyal is more than sufficient to cover AZRB’s liquidated bonds of 52.6 million Saudi Riyal. (AZRB’s) management indicates that the balance of 30 million Saudi Riyal will largely be used to pay off outstanding amounts owed to its subcontractors,” said Alliance’s Jeremy Goh in his note today.

On its prospects, RHB’s Joshua Ng said the research house “likes” AZRB’s earnings visibility, backed by the latter’s RM2.2 billion in outstanding construction order book and two concessions in the RM413 million-International Islamic University Malaysia campus in Kuantan and the RM1.55 billion-East Klang Valley Expressway (EKVE).

“Upon financial close, the EKVE will generate about RM1.5 billion worth of internal construction works for AZRB, as well as substantially boost its outstanding construction order book to RM3.7 billion,” he said in a note.

Additionally, RHB’s Ng said the research firm favours AZRB for its defensive non-construction businesses of bunkering and PLANTATION []s.