BNASTRA: Major Contract Win Bolsters Order Book, ‘Buy’ Rating Maintained
| Key Information | Details |
|---|---|
| Investment Bank | TA SECURITIES |
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading construction firm has significantly strengthened its order book with a landmark contract win, prompting an investment bank to reiterate a “Buy” recommendation. The recent achievement bolsters the company’s financial outlook and project pipeline, underscoring its robust growth trajectory in the construction sector.
Performance Review
The company recently announced securing two substantial work packages, collectively valued at MYR1.2 billion, for the main building works of a 63-storey serviced apartment project known as Causewayz Square in Johor Bahru. This contract represents the largest single project win in the company’s history. With this addition, year-to-date (YTD) FY26F new job wins now stand at approximately MYR3.4 billion, positioning the company well towards achieving its internal job replenishment target of MYR4 billion for FY26F. The overall order book has swelled to a record MYR5.8 billion, translating to an impressive order book-to-revenue cover ratio of 6x. The latest main building works for Causewayz Square are estimated to yield a net margin of approximately 10%.
Future Outlook
Analysts anticipate that the remaining MYR0.6 billion needed to hit the FY26F job wins target is expected to primarily originate from Johor or projects within the Klang Valley. The ongoing Rapid Transit System (RTS) Link project in Johor Bahru is anticipated to generate sustained demand for property launches, particularly around the Bukit Chagar RTS station. The company has already secured MYR1.8 billion worth of contracts from Johor Bahru, including two work packages for The Asteriaz. Furthermore, potential additional phases for The Asteriaz are estimated to have a construction value between MYR400 million and MYR500 million. Major clients like EXSIM Development and MAXIM Global have significant upcoming projects in Johor Bahru with potential for the company to secure further work, including an estimated Gross Development Value (GDV) of MYR2.3 billion for EXSIM’s New York Hotel land and MYR800 million for MAXIM Global’s Taman Pelangi development.
Valuation and Recommendation
Despite the significant contract win, earnings estimates remain unchanged as the latest job falls within the previously set FY26F job wins target. The investment bank maintains its target price of MYR2.69, derived by pegging the FY27F EPS to an unchanged target 17x P/E, with a 2% ESG premium. The stock is currently trading at a 13.8x FY27F P/E, which is considered a discount compared to the Bursa Malaysia Construction Index’s trading at approximately 16x during the CY17 construction upcycle. This valuation gap is assessed as unjustified given the company’s diversification beyond non-residential projects. Consequently, a “Buy” recommendation is reiterated.
Key Risks
The primary downside risk highlighted by analysts remains sluggish job replenishment trends; however, the company’s recent successes and robust pipeline are expected to mitigate this concern.
