PESTECH rises as much as 8.18% after bagging KLIA Aerotrain project
KUALA LUMPUR (Dec 28): PESTECH International Bhd rose as much as 6.5 sen or 8.18% to 86 sen on Tuesday morning (Dec 28) after securing the tender from Malaysia Airports Holdings Bhd (MAHB) for the development of an automated people mover (APM) Aerotrain project and associated works at the Kuala Lumpur International Airport (KLIA) for RM742.95 million.
At the time of writing, the counter had pared some gains to 84.5 sen, still up five sen or 6.29%.
The counter, which was among the most actively traded stocks, saw 10.17 million shares traded.
PESTECH announced on Monday that its wholly-owned subsidiary company PESTECH Technology Sdn Bhd had accepted the letter of award from Malaysia Airports (Sepang) Sdn Bhd for the works in relation to the design, supply, installation, testing and commissioning for the APM and associated works at KLIA, under Option 2, which includes financing (D&B works), and operations and maintenance (O&M services).
According to PESTECH, the commencement date of the project shall be from March 14, 2022 for three years for the D&B works, while the O&M services for 10 years will commence on March 14, 2025 until Feb 11, 2034.
It noted that the project will contribute positively towards revenue and earnings of PESTECH in accordance with the stage of D&B works project progress and the O&M services to be recognised in the financial year ending June 30, 2022 (FY22) to FY34.
In a note on Tuesday, Kenanga Research analyst Teh Kian Yeong said the contract win is highly positive, adding a new profile to PESTECH and will be a good reference for future airport train system tenders regionally.
“This contract so far is the biggest win for PESTECH since its listing and would boost its total order book from RM1.58 billion as of September 2021 and keep it busy for the next three years,” he said.
While this win tallies its FY22 actual order book replenishment at RM900 million, which is higher than Teh's new win assumption of RM800 million, he noted that it is still within his revenue forecast based on the project timeline.
As such, he is keeping his FY22-23 earnings estimates for PESTECH unchanged for now.
Meanwhile, due to a seasonally weak first-half period, he said the upcoming second quarter ending Dec 31, 2021 (2QFY22) is likely to be a soft quarter like 1QFY22 before a busy second half ending June 30, 2022 (2HFY22).
“Having said that, a better FY22 is expected as compared to FY21 as its key projects, namely the ODM and Tatay projects in Cambodia and the MRT 2 (Mass Rapit Transit 2) locally are advancing to later stages, which mean overall better margins in FY22,” he said.
He also said he continued to like the niche utility infrastructure play, which could potentially benefit from the revival of megaprojects domestically and the fast-growing energy infrastructure development market in Indo-China.
As such, he continued to rate the stock as an "outperform", with an unchanged target price of RM1.11.