We maintain BUY call on Vestland with a higher fair value ofRM0.70/share (from RM0.62/share previously) by raising our FY24F/FY25F/FY26F earnings by +9.2%/+12.8%/+5.0% on its latest job win.
Our revised FV, implies an upside potential of 55%, is based on an unchanged FY25F PE of 9x - the average for small- cap construction companies, plus a 3% premium for its superior 4-star ESG rating.
Vestland announced that it has won a civil construction works job worth RM195mil for site clearance, earthworks, drainage, pavement and road furniture works for the Kota Bahru-to-Kuala Krai Expressway in Kelantan.
This contract is a positive surprise, as it is not in its tender book.
Works will start 19 July 2024 with expected completion in 2026 over 24 months.
With this project in hand, the total job wins for the year is RM525mil, halfway to its annual target of RM1bil. The order book is now RM2.2bil, by our estimates.
Vestland typically makes 10%-13% gross margin for civil works. For this project, we assume a GP margin of 12%.
Vestland is currently trading at only 6x FY25F P/E, which is a deep discount to its peers that are trading at 8x-28x.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....