BNASTRA: Significant Contract Win Bolsters Order Book and Future Prospects
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A Malaysian construction firm recently announced its largest contract win to date, significantly expanding its order book and solidifying its revenue outlook. This substantial contract has prompted analysts to reiterate a positive stance on the company’s prospects.
Performance Review and Contract Details
The firm, through its wholly-owned subsidiary, successfully secured a combined RM1.2 billion in new contracts from Exsim Lumba Kuda Sdn Bhd. These agreements pertain to main building and infrastructure works for the Causewayz Square high-rise development in Johor Bahru. This landmark project entails the development of a 63-storey serviced apartment complex comprising four residential towers, to be carried out in five phases, and will feature multi-level podiums, parking facilities, retail outlets, and lifestyle amenities. Construction is scheduled for completion within 34 months from the commencement date.
This latest achievement elevates the company’s total outstanding order book to a robust RM5.8 billion, representing a solid 3.0x coverage of its estimated FY27 revenue. Analysts from Mercury Securities note that given the contract was awarded by a recurring client, project margins are expected to remain consistent, typically ranging between 8% to 9% for high-rise residential construction projects. The contract win was within Mercury Securities’ existing forecasts, leading to no changes in their FY26E-FY27E earnings projections.
Future Outlook and Strategic Positioning
Going forward, the company’s new order book is anticipated to be largely driven by its three key clients — EXSIM, MAXIM, and AIMS — through Johor-based projects. Further contributions are expected from a RM1.2 billion pipeline in the Klang Valley. The group is well-positioned to capitalize on these opportunities, focusing on green real estate and GBI-certified projects, which are seen to enhance asset value and meet increasingly stringent regulatory and environmental standards. This strategic focus is expected to reinforce the company’s competitive edge amidst a growing shift towards sustainable and energy-efficient infrastructure.
Potential Risks
Despite the positive outlook, Mercury Securities highlighted several risks to their recommendation. These include potentially weak flows of construction jobs from both public and private sectors, the possibility of project cost overruns, and rising costs of building materials.
Analyst Recommendation
Mercury Securities has reiterated its “BUY” call on the construction firm, maintaining an unchanged target price of RM2.54. This valuation is premised on FY27E EPS of 15.4 sen and a Price-to-Earnings Ratio (PER) of 16.5x. The last closing price for the company’s shares was RM2.14.
