INTA: Earnings Beat Expectations Amid Robust Order Book and Strategic Growth
| Key Information Summary | |
|---|---|
| Investment Bank | TA SECURITIES |
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation | |
An investment bank research report indicates a strong financial performance for a prominent construction group, which reported core earnings of MYR18.5 million in the first half of fiscal year 2025 (1H25), representing a significant 21% year-on-year (YoY) increase. This was underpinned by a robust 22% YoY growth in revenue, reaching MYR380.7 million for the same period. The improved performance is largely attributed to a better earnings mix, with higher-margin property development contributing substantially more to total earnings.
Performance Review and Profitability
The group’s gross profit margin (GPM) rebounded positively, rising to 11.2% in 1H25 from 10.4% in 1H24. This notable improvement in profitability reflects a more favorable project portfolio, particularly driven by its burgeoning property development division, which saw its contribution to total earnings jump from 5.3% a year ago to 34% in 1H25. The steady recognition of progress from ongoing construction projects also played a crucial role in these financial gains.
Robust Order Book and Future Prospects
Looking ahead, the group maintains a robust outstanding order book of approximately MYR1.9 billion as of 26 September, providing 18-24 months of earnings visibility, equivalent to a 3x cover ratio based on FY24 construction revenue. The tender book currently stands at MYR4.5 billion. The investment bank forecasts a strong job replenishment of MYR1.1 billion for FY26F and MYR1 billion for FY27F, based on an estimated 25% win rate for tenders. This positive outlook is supported by commendable project launches from renowned developers in the Klang Valley.
Strategic Diversification and Property Ventures
The group’s strategic diversification efforts are yielding significant results. Its property division successfully launched its inaugural project, Senuri Residence, in October 2023, achieving an impressive 100% take-up rate for open market units. Plans are in motion to launch two more development projects, Seiring Setia and Aliran Restu, within the next two years, with a combined gross development value (GDV) of approximately MYR500 million. The property arm’s revenue contribution is projected to substantially increase, from around 7% in FY24 to between 15% and 20% from FY25F to FY27F.
Further diversifying its income streams, the group has ventured into the lift and escalator market under the Canny Lift brand. This initiative is expected to provide recurring income through maintenance services, complementing its project-based construction earnings and enhancing overall financial resilience.
Financial Outlook and Investment Rating
The investment bank projects a three-year (FY24-27F) earnings Compound Annual Growth Rate (CAGR) of 16.9%. The group’s financial health remains strong, characterized by a healthy balance sheet and a net cash position since FY17 (excluding FY22 due to increased borrowings for property development funding). Return on average equity (ROAE) is expected to range between 18% and 20% for FY25F-27F, surpassing its peers, which warrants a premium for its target valuation.
The investment bank has initiated coverage with a BUY recommendation, setting a target price of MYR0.81, indicating a substantial 93% upside potential. This valuation incorporates a 2% ESG premium, reflecting the company’s strong ESG score of 3.1 out of 4. A key downside risk identified is the failure to secure new contracts in a timely manner.
