IBRACO: Construction Orderbook Anchors Earnings, Analyst Upgrades Rating to Buy

A recent research report from TA Securities highlights a robust outlook for a property and construction group, primarily driven by its solid construction orderbook and strategic pipeline replenishment efforts. Despite a softer property sales forecast for the upcoming fiscal year, the investment bank has upgraded its recommendation to “Buy,” citing improved upside potential following recent share price weakness.

Property Sector Performance and Outlook

For the fourth quarter of FY25, management indicated a slightly softer property sales outlook for FY26, attributed primarily to launch timing and slower booking conversions. New property sales in FY25 reached RM320mn, marking a 9% year-on-year increase, but still fell short of both internal and TA Securities’ RM350mn target. This shortfall was largely due to more stringent end-financing approvals from banks, affecting booking conversions.

Looking ahead, the group has set a more cautious sales target of RM300mn for FY26, with launches predominantly scheduled for the second half of the year. The NorthBank township, particularly the Business Exchange commercial component and Super Terrace phases, is expected to be a key growth driver. Additionally, PrimeBay Industrial Park, the group’s inaugural industrial development, has seen about 20% take-up, with SPA signings anticipated in 1Q26. Promotional activities are also underway for NewUrban Residence in PJ South, which currently has a 45% take-up rate. As of end-FY25, unbilled property sales stood at RM304mn, providing clear earnings visibility.

Construction Segment Strength and Future Pipeline

Construction remains the primary pillar of the group’s earnings, underpinned by a substantial existing orderbook. As of end-FY25, the construction orderbook amounted to RM734.9mn, ensuring earnings visibility for the next two years. Key ongoing projects, such as the Kuching Autonomous Rapid Transit (ART) system and the Sarawak Second Trunk Road, are progressing steadily and are expected to continue driving construction revenue through FY26-FY27.

The group is actively focused on replenishing its construction pipeline, targeting approximately RM1.0bn in new job wins for FY26. This ambition is supported by an equally significant active tender book of around RM1.0bn. Furthermore, a Letter of Intent (LOI) for a large government quarters project was secured at end-FY25, with final negotiations currently in progress. Potential additional opportunities include the Kuching ART Green Line, estimated at RM1bn, which is awaiting tender. The group’s proven track record in executing large-scale infrastructure projects positions it favorably to capitalize on Sarawak’s broader development agenda.

Analyst Rating and Valuation

TA Securities has maintained its earnings forecasts for FY26-FY28. The investment bank anticipates a final dividend of 4.5 sen per share, representing a 34% payout ratio, consistent with the group’s historical average.

The target price remains at RM1.32 per share, derived from a Sum-of-the-Parts (SOP) valuation. The recommendation has been upgraded from “Hold” to “Buy” following recent weakness in the share price, which has enhanced the total upside potential to over 12%.