Ahmad Zaki Resources- RM673m Contract Tops Estimate

THE BUZZ

Ahmad Zaki (AZRB) has secured a RM673m contract from PNB to refurbish MAS’ former headquarters along Jalan Sultan Ismail as well as build a new 50-storey hotel tower next to the existing building.

OUR TAKE 

Details on the contract. According to its official Bursa announcement, the RM673m contract involves refurbishing the former 35-storey MAS headquarters and building a 50-storey hotel tower with a six-basement floor car park on the existing podium next to the building. The tenure is for a total of five years with a target completion by Oct 2017.

Within expectations. The announcement came within our expectations, as highlighted in our previous report titled “Ace In The Making” on 20 June that AZRB was actively exploring the possibility of tendering for the contract, according to channel checks. With this sizeable contract in hand, AZRB has secured RM1.44bn worth of new jobs YTD, exceeding our previous orderbook replenishment of RM1bn for FY12. We estimate that its current orderbook stands at RM2.17bn. Assuming a burn rate of RM250m-RM300m per quarter, this will last the company well into 2014. 

TRADING BUY. That said, we are maintaining our TRADING BUY call on AZRB. Incorporating this new job into our forecasts, our FV is now revised up to RM0.93 based on an unchanged 10x FY13 PE. We assume no more contract winnings for the remainder of the year while our FY13 and FY14 orderbook replenishment remains unchanged at RM500m p.a.

THE BUZZ Ahmad Zaki (AZRB) has secured a RM673m contract from PNB to refurbish MAS’ former headquarters along Jalan Sultan Ismail as well as build a new 50-storey hotel tower next to the existing building.

OUR TAKE Details on the contract. According to its official Bursa announcement, the RM673m contract involves refurbishing the former 35-storey MAS headquarters and building a 50-storey hotel tower with a six-basement floor car park on the existing podium next to the building. The tenure is for a total of five years with a target completion by Oct 2017. Within expectations. The announcement came within our expectations, as highlighted in our previous report titled “Ace In The Making” on 20 June that AZRB was actively exploring the possibility of tendering for the contract, according to channel checks. With this sizeable contract in hand, AZRB has secured RM1.44bn worth of new jobs YTD, exceeding our previous orderbook replenishment of RM1bn for FY12. We estimate that its current orderbook stands at RM2.17bn. Assuming a burn rate of RM250m-RM300m per quarter, this will last the company well into 2014. TRADING BUY. That said, we are maintaining our TRADING BUY call on AZRB. Incorporating this new job into our forecasts, our FV is now revised up to RM0.93 based on an unchanged 10x FY13 PE. We assume no more contract winnings for the remainder of the year while our FY13 and FY14 orderbook replenishment remains unchanged at RM500m p.a. FYE Dec (RMm) FY10 FY11 FY12f FY13f FY14f Revenue          430.7          534.9          736.6          806.1          838.1 Net Profit           (61.6)            11.9            21.0            25.9            27.5 % chg y-o-y -331.9% -118.4% 67.2% 22.8% 6.5% Consensus - - - EPS (sen)           (22.3)              4.3              7.6              9.3              9.9 DPS (sen)              2.6              1.9              2.3              2.8              3.0 Dividend yield (%) 3.7% 2.7% 3.3% 4.0% 4.3% ROE (%) -27.8% 6.2% 10.3% 11.6% 11.4% ROA (%) -8.8% 1.8% 3.0% 3.4% 3.4% PER (x)             (3.1)            16.3              9.2              7.5              7.0 BV/share (RM)            0.66            0.69            0.74            0.81            0.88 P/BV (x)              1.1              1.0              0.9              0.9              0.8 EV/EBITDA (x)             (4.0)              3.7              2.8              2.8              2.3

Source: OSK