Construction (OVERWEIGHT)
FY11 results review
- Construction activities rebounded… During
the latest quarter’s results, construction activities in general
rebounded as indicated in the sequential revenue growth. However, it did
not necessarily translate to earnings growth as occurred for the likes
of MRCB and TRC Synergy.
- Slight disappointment… Overall,
there were more disappointments than upside surprises for construction
stocks within our coverage. The disappointments were largely from MRCB
and TRC Synergy while the others came relatively in line. On the other
hand, Sunway beat our expectations slightly due to improved overall
performances.
- Crucial year for replenishment… After
a quiet year in terms of contract flows last year, most construction
companies are running down on their existing order book and this year
will be important for them to replenish it in order to maintain decent
growth rates for FY2013. That said, with the expediting of ETP projects
and improved newsflow for the sector, we believe that the sector will
have ample opportunities for more contract wins.
- We maintain our OVERWEIGHT stance
on the sector with a P/E of 14x for the larger cap construction
counters and 12x for the mid/smaller cap companies. The historical KLCON
Index P/E is ~15x.
- Our top picks in order of preference:
- Sunway (TP: RM3.20);
- Gamuda (TP: RM4.41)
- Mudajaya (TP: RM4.61)
- MRCB (TP: RM2.50)
Source: HLIB Research 12 March 2012
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