by HARIZAH KAMEL / pic by BERNAMA
PUBLIC Investment Bank Bhd (PublicInvest Research) derived a fair value of 35 sen for Bursa-bound Aneka Jaringan Holdings Bhd, slightly above its offer price of 33 sen on the grounds that the company stands to benefit from key infrastructure projects.
The fair value is based on a 14 times price-to-earnings multiple to its financial year 2021 (FY21) forecast earnings per share of 2.5 sen.
Aneka Jaringan is expected to leverage its major projects to strengthen its core competency in foundation and basement construction.
PublicInvest Research in a recent note last week noted that the continuation of large-scale infrastructure projects in the country would provide an upside potential for Aneka Jaringan as these projects are likely to involve foundation and basement works.
The projects include the Mass Rapid Transit Line 2 project (MRT2), Light Rail Transit Line 3, East Coast Rail Link (ECRL), Johor Baru-Singapore Rapid Transit System and 12th Malaysia Plan’s focus on affordable housing, smart construction and seamless transport.
PublicInvest Research said the economic stimulus packages announced by Putrajaya to support Malaysia’s economic recovery will facilitate continuing activities in the construction industry, which will benefit operators within the sector, including Aneka Jaringan.
The company reported lower revenue growth for FY19, mainly due to the completion of two basement work projects, namely Sentral Suites and Pavilion Ceylon Hills in Kuala Lumpur.
Furthermore, the group’s operations for its ongoing projects were temporarily suspended because of the Covid-19 outbreak and the enforcement of the Movement Control Order (MCO).
Aneka Jaringan recorded a revenue of RM9.4 million in March prior to the MCO before dropping to RM600,000 in April. The company recommenced its operations gradually from May with stricter operating procedures.
“As such, we expect the group to report a revenue of RM28.4 million in its fourth quarter of FY20 results due this month, with anticipation that the group would register RM132.9 million in full-year revenue for FY20.
“Nevertheless, we expect its revenue to improve gradually starting FY21 onwards in anticipation of the group securing RM130 million in new orderbook,” said Public-Invest Research.
It also said it is positive on the sector from 2021 onwards, with more aggressive awarding of local infrastructure projects such as ECRL, Pan Borneo Highway, Bandar Malaysia and the Klang Valley MRT3.
Given the construction sector is always seen as one of the key drivers in stimulating economic growth, PublicInvest Research expects growth of 2.3% in revenue to RM136 million in FY21.
The piling and foundation specialist plans to expand its fleet of construction machinery and equipment for its operations in Malaysia in anticipation of increasing business opportunities in foundation and basement construction.
As such, it plans to purchase two units of rotary drilling rigs and one unit of crawler crane between 2021 and 2023, which will enable the firm to facilitate timely completion of its projects and be less dependent on the rental of such machinery and equipment from external parties.
On its expansion of operations in Indonesia following the Indonesian government’s decision to accelerate infrastructure development in the country, the company
plans to expand its fleet of construction machinery and equipment to be in a better position to address business opportunities in foundation and basement construction for new projects in the region.
In terms of its expansion to Singapore, part of its strategy is to explore opportunities to provide foundation and basement construction.
The company registered a branch office in Singapore earlier this year and is applying for a builder’s licence from Singapore’s Building and Construction Authority’s Builders Licensing Scheme.
Upon securing projects, it plans to utilise its fleet of construction machinery and equipment, as well as a technical team from Malaysia to undertake projects in the initial stages until the group expands its resources in Singapore.
Aneka Jaringan is scheduled to list on Oct 20.