RHB Research has maintained its Buy call on Ahmad Zaki with a fair value of 96 sen, adding that the group is a good small-cap proxy to public infrastructure spending given its involvement in the construction of the Klang Valley MRT project and various government facilities.
In a note on Wednesday, its current outstanding construction orderbook of MRM2.1bil may increase by RM1.55bil to RM3.6bil when the RM1.55bil East Klang Valley Expressway (EKVE) hits the ground over the immediate term.
“We also like Ahmad Zaki for its stable of concession assets comprising a highly profitable bunkering operation at the Kemaman Supply Base in Terengganu, the International Islamic University of Malaysia (IIUM) Teaching-Hospital currently under construction (38% completed), and the EKVE under planning.
“In addition, there is tremendous value in its 21,000ha oil palm plantations (23% planted) in West Kalimantan, Indonesia,” it said.
RHB expects Ahmad Zaki’s net profit to hit the RM30mil mark in FY15 from less than RM6mil in FY13, backed by improved construction profits as key construction jobs hit major billing milestones, and in the absence of further provision for overseas losses.
Also, reduced plantation losses at its oil palm plantations in Indonesia, which begin to attain maturity, organic growth at its bunkering operation, interest savings thanks to RM103.3mil proceeds from the recent rights issue, and normalization of its effective tax rate.
