Protasco has healthy current order book of RM700 million

by **Cals** Thu 05 Jun 2014, 03:10

Business & Markets 2014

Written by MIDF Research

Wednesday, 04 June 2014 09:31

Protasco Bhd
(June 3, RM1.94)
Maintain buy with unchanged target price of RM2.90: HCM Engineering Sdn Bhd, a wholly-owned subsidiary of Protasco, has secured a RM21 million contract from the Public Works Department to construct overtaking lanes on the roads from Sibu to Bintulu and from Bintulu to Tatau in Sarawak.

Assuming a margin of 14% with a completion period of 12 months, we expect this project to contribute approximately RM1.3 million and RM1.6 million to the group’s financial year 2014 ending Dec 31 (FY14) and FY15 operating profit respectively.

The Sarawak job win was not unexpected as the group has a track record in undertaking the same road works — it had secured a RM23 million job last year in the same zone.

So far this year, Protasco has replenished RM109 million worth of contracts, accounting for 36% of our RM300 million new job assumption in FY14. With this new job, we estimate that Protasco has an outstanding order book of approximately RM700 million.

We are neutral on the latest job win as contribution from the contract has already been captured in our job replenishment assumption of RM300 million for the current year. Hence, we make no changes to our earnings forecasts.

We reiterate our “buy” recommendation on Protasco with an unchanged target price of RM2.90 based on FY15 sum-of-parts valuation. We continue to like Protasco due to: (i) its healthy construction order book of RM700 million; (ii) potential road construction jobs in the pipeline (Pan-Borneo Highway and nationwide rural road network upgrades); (iii) recurring maintenance concession earnings; (iv) integrated flagship property development on a 100-acre (40.5ha) site in Bangi, Selangor and 14.4-acre tract in Pasir Gudang Johor; and (v) profit guarantee from its oil and gas business. — MIDF Research, June 3

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This article first appeared in The Edge Financial Daily, on June 4, 2014.
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