Overview

Inta Bina Group Bhd (INTA) is primarily engaged in the construction of residential, commercial, industrial, and leisure property buildings. Its clientele includes prominent names such as Ecoworld, Gamuda Land, Mah Sing, Sime Darby Property, Sunway, and UEM Land, among others.

Investment Themes

• Robust Property Sector is a Boon to INTA. INTA's core revenue is primarily derived from construction work, which stands to benefit from the revitalisation of the property sector. In 2022 and 2023, there were fewer new property project launches due to escalating raw material costs, particularly cement and steel bars. Looking ahead, we anticipate that most property developers will initiate more new project launches from 2HCY24 onwards as input costs stabilise. Consequently, we expect INTA to benefit from the resurgence of the property sector, particularly by securing more contracts from key industry players.

• Strong Orderbook and Earnings Visibility. Currently, INTA’s outstanding order book stands at RM1.8bn, translating to 2.9x FY23 revenue. The group's year-to-date new job wins of RM1.1bn have already surpassed our initial FY24 job replenishment assumption of RM800mn. By actively pursuing new opportunities, INTA has accumulated a gross tender book value of RM4.1bn and aims to achieve approximately c.RM1.5bn in new job wins this year. We are confident that INTA is well-positioned to meet its order book replenishment target, given its proven track record in high-rise building construction.

• Improving Profitability Margin Ahead. Looking forward, we expect a gradual improvement in INTA’s net margin, driven by stabilising input costs and the initiation of new projects with better margins. Despite the diesel subsidy rationalisation, INTA’s exposure to escalating costs remains manageable, as its machinery and equipment are less reliant on diesel. Over the past two years, INTA’s net margin has been impacted by rising raw material costs and minimum wage issues, resulting in a net margin below 4%. However, we anticipate an uplift in net margins due to the company’s strategic focus on designand-build projects, which typically yield higher margins.

Risk

• The risks to our earnings forecasts include: 1) lagging in order book replenishment, 2) project execution risks, and 3) potential cost escalation of construction materials.

Recommendation

• We value INTA at RM0.71, based on unchanged 11x CY25 EPS. Maintain BUY call on INTA.

Source: TA Research - 2 Jul 2024