KUCHING: Ibraco Bhd’s (Ibraco) earnings in the near future is expected to remain tepid due to the lack of contributions from its latest and maiden KL project.
However, analysts pointed out that Ibraco has plans to continue venturing out from Sarawak, targeting larger catchment areas namely Penang, Selangor, KL and Johor.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) in a report highlighted that for the next five years, Ibraco has plans to launch up to RM1.5 billion worth of gross development value (GDV) mainly from their Northbank Kuching development.
“As for FY17, management plans for RM188 million of launches solely from this Northbank development.
“The project is a mixed development project targeting the above average income segment with landed residential (terraces) priced at a higher range of RM800,000 to RM900,000,” it added.
During the gathering, Ibraco also pointed out that it is currently tendering for a couple of government-related construction jobs in Sarawak.
“That said, we note that Ibraco’s construction arm has only been focusing on their inhouse development all this while,” Kenanga Research opined.
In terms of land costs, it noted that Ibraco’s effective land cost of land in Sarawak ranges from RM100,000 to RM200,000 per acre indicating a low land cost to GDV of circa one to two per cent.
“We note that Ibraco currently has 628 acres of undeveloped lands with GDV value of RM5.8b where the major portion (more than 95 per cent) is in Kuching.
Moving forward, the group plans to continue venturing out from Sarawak, targeting larger catchment areas namely Penang, Selangor, KL and Johor.
“Given their first project in KL – ‘ContiNew’ securing relatively decent take up rates of 46 per cent since the launch in the financial year 2016 (FY16), we believe management may continue to look out for more pocket developments in
KL,” the research team commented.
As of February 28, 2017, it noted that unbilled sales for Ibraco stood at RM300 million and as such, it pointed out that a large portion (58 per cent) of its unbilled sales were from their ‘Continew’ development which is currently at its piling stage.
“Hence, we believe ‘ContiNew’ will only show significant revenue contributions from FY19 onwards. In view of this, we believe Ibraco’s top-line for the next two years is likely to remain flattish given that we do not expect extraordinary take up rates for their on-going developments and new launches,” it opined.
Overall, Kenanga Research said, Ibraco is trading above other small-mid cap peers’ range of six to nine-folds.
“Given that earnings in the near future is expected to remain tepid due to the lack of contributions from their ‘ContiNew’ development considering its initial stages of construction, we feel that Ibraco’s valuations is relatively steep at this juncture,” it added.