Results Review

• INTA’s 9MFY24 core earnings of RM24.2mn beat our expectations, accounting for 81.8% of our full-year estimates. The surprise was mainly driven by stronger-than-expected recovery in the profitability margin resulting from easing input costs.

• YoY, its 9MFY24 core earnings surged by 47.8%, despite relatively flat revenue growth of 0.6%. This was primarily driven by increased contributions from tail-end construction projects, supported by improved margins due to easing input costs.

• QoQ, 3QFY24 revenue rose by 17.5%, driven by growing revenue recognition from newly secured construction projects during 1HFY24. However, core earnings grew moderately by 8.5%, constrained by a higher effective tax rate (+2.6 ppt).

• A second interim dividend of 1.0 sen/share was declared in 3QFY24, bringing the total dividend for 9MFY24 to 2.0 sen/share, (vs 1.0 sen/share in 9MFY23). This exceeded our dividend per share assumption of 1.5 sen/share, translating to a dividend payout ratio of 45.8%.

Impact

• Given the strong earnings improvement, we have revised certain construction projects’ margins assumption. As a result, our FY24-26F earnings forecasts have been adjusted higher by 8.4%/5.0%/0.2%, respectively. Meanwhile, we have incorporated the higher dividend declared YTD into our earnings model.

Outlook

• INTA’s earnings outlook remains robust, supported by a strong outstanding order book of RM1.7bn as of the end of September, equivalent to 2.6x FY23 revenue. Notably, INTA has secured approximately RM1.2bn in new contracts YTD, achieving 75% of our fullyear replenishment assumption of RM1.6bn. However, we are cautious about potential pressures on profitability margins from the proposed increase in minimum wage and EPF contributions for foreign workers, as outlined in the Budget 2025. These adjustments could lead to higher labour costs and impact overall profitability.

Valuation

• Following the earnings adjustment, we have revised our target price higher to RM0.76 (from RM0.72 previously), premised on unchanged 11x CY25 earnings. We continue to like INTA for the following factors: (i) a direct beneficiary of the robust domestic property sector, (ii) strong earnings visibility backed by a resilient orderbook, and (iii) improving profitability. Maintain Buy call on the stock.

Source: TA Research - 27 Nov 2024