Better showing seen by PESTECH on MRT 2 and Cambodia projects
KUALA LUMPUR: PESTECH International Bhd
is expected to record better results in the financial year ending June 30, 2022 (FY22) compared with FY21.
This is given that the group’s key projects in Cambodia and the Klang Valley Mass Rapid Transit Line 2 (MRT 2) are advancing to later stages, which could translate into overall higher margins, according to Kenanga Research.
In Cambodia, PESTECH has a 70% stake in ODM Power Co Ltd, which manages a concession asset, and a Stung Tatay Hydro plant – Phnom Penh’s transmission system project.
The research unit said it continues to like PESTECH as a niche utility infrastructure play that could potentially benefit from the revival of mega projects domestically and the fast-growing energy infrastructure development market in Indochina.
Kenanga Research maintained its “outperform” call on PESTECH with unchanged target price of RM1.11.
However, the risks to its call include failure to replenish orderbook and cost overruns.
Meanwhile, PESTECH’s biggest-ever contract win of the RM743mil KL International Airport (KLIA) aerotrain project – which comes with financing, and operations and maintenance (O&M) services – did not change Kenanga Research’s forecasts for the group.
“While this win tallies FY22 actual orderbook replenishment to RM900mil, which is higher than our new win assumption of RM800mil, it is still within our revenue forecast based on its project timeline,” it said.
Meanwhile, Kenanga Research noted that due to the seasonally weak first-half period, the upcoming second financial quarter ending Dec 31, 2021 is likely to be soft like the first quarter of FY22 before the busy second half of FY22.
It pointed out that the KLIA aerotrain is a highly positive win, being the group’s first airport train system project, which will act as a good reference for future tender regionally.
Under the deal, the engineering, procurement, construction and commissioning project, which uses Bombardier transportation technology, will start from March 2022 until March 2025 while the 10-year O&M services will start from March 2025 until Feb 2034.
“This contract would boost PESTECH’s orderbook from RM1.58bil as of Sept 2021 and keep it busy for the next three years,” said Kenanga Research.