Valuation / Recommendation

We initiate coverage on Binastra Corp Berhad (Binastra) with a BUY call and a TP of RM2.20, translating to 24% potential upside. Our TP implies 18.4x FY26F PE which is in line with similar peers’ average. We like Binastra for its robust orderbook (driven by long-standing clients with vibrant growth prospects) and superior profit margin. Key re-rating catalysts for the stock include major contract wins and stronger property sales by its key customers.

Investment Highlights

Robust property pipelines from key clients. Binastra has been in longstanding partnerships with 3 key clients, namely EXSIM, MAXIM and PV for > 5 years, with EXSIM contributing over 70% of its orderbook. Collectively, we estimate planned project launches by these key clients over the next 3 years to be worth a combined GDV of RM10bn. Some of these launches include ongoing multi-phase projects in Klang Valley such as Central Park Damansara, EXSIM Bukit Jalil, and KL Wellness City, where Binastra is already the existing contractor. Outside Klang Valley, following their recent land-banking activities in Johor, we expect EXSIM and MAXIM to ramp up new property launches in the state in 2025, with Binastra likely to be selected as the preferred contractor given that those projects will be high-rise developments.

DC and EPCC jobs further add to its orderbook. In 2024, Binastra secured RM992m in data centre projects and RM223m in EPCC jobs related to sewage treatment plants. As such, the composition of its orderbook is quite balanced, comprising high-rise residential (55%), data centres (24%), and other construction-related projects (20%). As of Dec 2024, Binastra’s outstanding construction orderbook stands at RM3.7bn, representing an impressive 3.9x cover of its expected FY25 revenue. The strong cover ratio reflects its recordhigh orderbook replenishment of RM3.1bn in FY25. Looking ahead, Binastra is targeting an annual orderbook replenishment of RM3.0bn in FY26-27F, which we believe is achievable given the robust project pipelines from its key clients.

Superior profit margin. Binastra has consistently achieved net margins of 9- 10%, outperforming industry peers. This is driven by its long-standing client relationship that helps to secure favourable contract terms and ensure prompt payments, reducing working capital needs. Nevertheless, we expect Binastra’s net margins to normalise slightly to 8.7-9.4% in FY25-27F, mainly due to the increase in DC and EPCC works that carry lower margins than its typical highrise construction.

Risk factors for Binastra include (1) Failure to replenish orderbook; (2) Fluctuation in construction cost; (3) Sluggish property market outlook

Company Background

Full-range construction services provider. Binastra Corporation Berhad (Binastra), through its wholly-owned subsidiary Binastra Builders Sdn Bhd, is a well-established G7-registered building contractor under the Construction Industry Development Board (CIDB). Since its inception in 1980, Binastra has completed 189 projects with a cumulative value exceeding RM12bn, underscoring its proven track record and leadership in the construction sector.

The listing of Binastra kicked off with the reverse takeover exercise on Comintel Corporation Berhad, a PN17-status company since 2019. Under the leadership of Managing Director Datuk Jackson Tan Kak Seng and his management team, a comprehensive regularisation plan was executed, culminating in Comintel's upliftment from PN17 status in September 2023. The transformation was completed with the rebranding of Comintel as Binastra Corporation in March 2024

Source: Mercury Research - 6 Jan 2025