Tuesday, December 7

Pestech on track to meet analysts’ contract win assumption with third contract in FY17

0

KUCHING: With its third contract win in financial year 2017 (FY17), Pestech International Bhd (Pestech) is on track to meet Kenanga Investment Bank Bhd’s (Kenanga Research) FY17E contract win assumption of RM800 million.

Pestech’s board of directors announced in a filing on Bursa Malaysia that the group’s wholly-owned subsidiary company Pestech Sdn Bhd (PSB) together with Fuji Electric Asia Pacific Pte Ltd (Fuji) had, via a non-incorporated consortium formed by both parties called ‘Pestech-Fuji JV’, accepted a letter of award from Sarawak Energy Bhd (SEB) on September 23, 2016 in relation to SEB’s New Bintulu B, 275/(132)kV substation establishment for a contract value of RM89.5 million.

“The project is expected to commence on October 4, 2016 and to be completed within 21 months from the commencement date,” the group said.

Kenanga Research was pleased to see Pestech securing this project, which showed the group’s ability to clinch job from existing clients and that said a lot about its track record.

“We understand that Pestech will be recognising the bulk of the contract value in its account as Fuji is playing the role of project coordinator in this project.

“Profit margin is expected to be the same targeted net returns of 10 per cent to 12 per cent,” it said.

With this job, Pestech has already secured three contracts in FY17 totalling circa RM162 million order-book against the research arm’s contract win assumption of RM800 million.

Kenanga Research believed its contract win assumption of RM800 million in FY17 was achievable given that Pestech has tendered for three major jobs, of which the group had high chances of securing.

“These three tenders which could be worth up to RM1.5 billion in total include one local rail electrification project and two substations and transmission lines projects in Cambodia,” the research arm said.

Thus, the research arm kept its estimates unchanged for now, backed by RM965 million of Pestech’s current order-book.

“This contract win again shows that Pestech is able to secure job from existing clients, which tells a lot of its track record,” Kenanga Research reiterated.

“Besides, it is also completing in the same level field with world-class industry players like Siemens and ABB, which showcased its technical expertise.”

The research arm expected another slew of contract flows in the next few months that should propel the company’s earnings to new heights.

All in, Kenanga Research continued to rate the stock ‘outperform’ for Pestech’s explosive earnings growth story with an unchanged price target of RM2 per share.