Tuju Setia’s revenue to grow significantly

As at March 31, 2021, the firm’s tender book stood at RM3.9b and the group has secured RM398m worth of new projects YTD


TUJU Setia Bhd’s revenue is expected to improve signi cantly in the financial year 2021 (FY21), backed by its outstanding orderbook of RM953.1 million to date, according to Public Investment Bank Bhd (PublicInvest).

As at March 31, 2021, Tuju Setia’s tender book stood at RM3.96 billion and the group has secured RM398.1 million worth of new projects year-to-date (YTD).

In a research note yesterday, PublicInvest stated the developer’s growth momentum could potentially carry over into FY22, with Tuju Setia expected to secure another RM400 million orderbook by the end of this year.

The firm is poised to record revenue and net profit growth of 64.6% and 127.1% for FY21 respectively.

The company intends to seek opportunities in property development projects as a high-rise construction specialist to sustain and grow its business.

“Despite the overhang conditions in both high-rise residential and non-residential properties in Malaysia, there continue to be opportunities in projects within property development in 2020,” PublicInvest stated.

The investment bank added that this is demonstrated by the future supply of high-rise residential properties, which stands at 375,167 units as of 2020, including 111,795 units from Kuala Lumpur and 82,982 units from Selangor.

The future supply of high-rise commercial properties in Malaysia as of 2020 stands at 347,113 units, inclusive of 131,586 units from Kuala Lumpur and 87,071 units from Selangor.

PublicInvest noted Tuju Setia intends to expand its core competency in building construction, focus on high-rise buildings,widen its services to cover design and construction for hospital projects, and scale up its operational facilities.

PublicInvest said Tuju Setia’s competitive strengths include having an established track record in a diverse range of high-rise construction, timely completion of projects and quality of construction works, and adoption of various industrialised building system construction techniques.

The bank said favourable interest rate and lending policies, availability of loans for construction, government initiatives in implementing various affordable housing schemes and the continuation of large-scale infrastructure projects are the catalysts needed for Tuju Setia.

However, it said competition from other construction companies, exposure to the inherent risks in the construction industry and dependency on its subcontractors,among others, could cause downside risks to Tuju Setia’s growth plans.

Tuju Setia is seeking a listing with an enlarged issued and paid-up share capital of 316.83 million shares on Bursa Malaysia Bhd’s Main Market.

Pursuant to the IPO listing on May 19, its market capitalisation is RM221.8 million based on its IPO offer price of 70 sen. The IPO exercise is expected to raise RM56 million from the issuance of 80 million new shares.

Additionally, there would be an offer to sell 27 million existing shares. “We derive a fair value of RM1.11 on Tuju Setia based on an 11 times price-to-earnings (PE) multiple to its FY22 forecast earnings per share of 10.1 sen,” PublicInvest stated.

Separately, Maybank Investment Bank Bhd noted Tuju Setia is trading at a historical FY20 core PE of 18.5times,atitsIPOofferpriceof70 sen, based on its pro forma financial statements.

In comparison, the Bursa Malaysia Construction Index trades at 2020 PE of 21.4 times and a prospective 2021 PE of 14.7 times.

“Management aims to tender for more hospital projects going forward to improve margins.

“Its current hospital project achieved a gross profit (GP) margin of 18.4% versus non-residential and residential projects which attained a GP margin of 7.5% and 6.2% respectively,” the investment bank stated in a research note.