Stock Name: AZRB
Company Name: AHMAD ZAKI RESOURCES BHD
Research House: OSK
Ahmad Zaki Resources Bhd (AZRB)
(April 5, 91.5 sen)
Maintain buy at 89 sen, target price lowered to RM1.16: Last Friday, AZRB announced that it had received a letter of award from Putrajaya Holdings Sdn Bhd for project "Block 1, Menara PJH, No 2, Persiaran Perdana, Precinct 2, 62100 Putrajaya" valued at RM60 million.
This announcement is not really a surprise as we had highlighted in our FY09 results review the possibility of AZRB winning it. The contract involves AZRB constructing some shoplots and an office, namely a three-storey building with a basement car park. The job will commence immediately and is scheduled for completion over the next 24 months to April 7, 2012.
From our tracking of contracts awarded on Bursa, the average domestic job size during 1Q10 stood at RM169 million in comparison to the same period in 2009 where the average size was RM183 million. As one of our key sector themes for 2010, we expect most jobs to be small in nature. Small-cap contractors such as AZRB are in the best position to benefit from this as their order books usually constitute job of this size namely between RM100 million and RM300 million.
Including this recent job win, we estimate AZRB's order book to date at more than RM1.3 billon. The management is guiding for a replenishment target of RM600 million for FY10, while our assumption stands at RM300 million. We gather that AZRB is eyeing a housing job in Terengganu worth RM100 million.
Recent media reports said that Perdana Parkcity Sdn Bhd, a subsidiary of the Samling Group, has shortlisted seven companies, including AZRB, to build a RM250 million hospital in Desa Parkcity. Apart from that, AZRB is also eyeing two private finance initiative-type (PFI) jobs. On the LRT extension worth RM5 billion ex land acquisition cost, AZRB has been prequalified and intends to participate in some civil works packages.
We maintain buy with a target price of RM1.16. For the sake of consistency, our target price for AZRB is based on 11 times FY10 earnings, previously we had used a blended approach using price-earnings ratio (PER) and price/book value (P/BV) multipliers. Our RM1.16 target price implies a decent 30.5% upside from current levels. - OSK Research, April 5
This article appeared in The Edge Financial Daily, April 6, 2010.
Company Name: AHMAD ZAKI RESOURCES BHD
Research House: OSK
Ahmad Zaki Resources Bhd (AZRB)
(April 5, 91.5 sen)
Maintain buy at 89 sen, target price lowered to RM1.16: Last Friday, AZRB announced that it had received a letter of award from Putrajaya Holdings Sdn Bhd for project "Block 1, Menara PJH, No 2, Persiaran Perdana, Precinct 2, 62100 Putrajaya" valued at RM60 million.
This announcement is not really a surprise as we had highlighted in our FY09 results review the possibility of AZRB winning it. The contract involves AZRB constructing some shoplots and an office, namely a three-storey building with a basement car park. The job will commence immediately and is scheduled for completion over the next 24 months to April 7, 2012.
From our tracking of contracts awarded on Bursa, the average domestic job size during 1Q10 stood at RM169 million in comparison to the same period in 2009 where the average size was RM183 million. As one of our key sector themes for 2010, we expect most jobs to be small in nature. Small-cap contractors such as AZRB are in the best position to benefit from this as their order books usually constitute job of this size namely between RM100 million and RM300 million.
Including this recent job win, we estimate AZRB's order book to date at more than RM1.3 billon. The management is guiding for a replenishment target of RM600 million for FY10, while our assumption stands at RM300 million. We gather that AZRB is eyeing a housing job in Terengganu worth RM100 million.
Recent media reports said that Perdana Parkcity Sdn Bhd, a subsidiary of the Samling Group, has shortlisted seven companies, including AZRB, to build a RM250 million hospital in Desa Parkcity. Apart from that, AZRB is also eyeing two private finance initiative-type (PFI) jobs. On the LRT extension worth RM5 billion ex land acquisition cost, AZRB has been prequalified and intends to participate in some civil works packages.
We maintain buy with a target price of RM1.16. For the sake of consistency, our target price for AZRB is based on 11 times FY10 earnings, previously we had used a blended approach using price-earnings ratio (PER) and price/book value (P/BV) multipliers. Our RM1.16 target price implies a decent 30.5% upside from current levels. - OSK Research, April 5
This article appeared in The Edge Financial Daily, April 6, 2010.
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