KAB (0193) - Kejuruteraan Asastera Berhad - Paving The Way For Organic Growth
Kejuruteraan Asastera Bhd (KAB) is principally involved in the provision of electrical engineering services involving installation, testing and commissioning of electrical systems comprising electrical distribution systems, communications and information technology networks and extra low voltage systems. Also, KAB provides mechanical engineering services involving the installation, testing and commissioning of air-conditioning and mechanical ventilation systems. Revenue is further derived from the sale of goods such as cables, switches, trunking, pipes and electrical accessories, which are required for undertaken projects during installation stage. As the company focuses on organic growth to capture greater market share in the construction sector, we therefore value KAB at RM0.260 based on 9x FY18F EPS, ascribing a 25% discount to construction sector’s average PER of 12x. We reckon a discount is warranted given KAB’s small market capitalization and order book relative to its construction peers. The IPO is expected to raise approximately RM20.0m from the issuance of 80.0m new shares, with 60.5% of its proceeds to be utilised as working capital requirements for project costs and expenses, purchase of materials and components and human resources expenses.
 |
| KAB (0193) - Kejuruteraan Asastera Berhad - Paving The Way For Organic Growth |
Key growth drivers. KAB’s growth will focus on i) growing market share in Malaysia, ii) growing mechanical engineering services segment, and iii) expanding maintenance services.
Competitive strengths. Holding the highest class and grade of certifications, KAB is a nominated subcontractor in the majority of projects undertaken. Offer of comprehensive electrical and mechanical engineering services are backed by an experienced management team. Services in good quality are delivered through quality assurance policies and practices and an internal quality assurance audit team.
Catalysts. i) recovery in construction activities as a result of private investments and government policies, ii) government’s efforts to launch and promote affordable housing programmes nationwide, and iii) refurbishment and maintenance in need for old buildings to prolong the lifespan of the properties.
Key risks. Key downside risks among others include (i) dependency on the services of subcontractors for contracts’ completion, and (ii) competition from existing industry players.
Source: PublicInvest Research - 6 Nov 2017
https://klse.i3investor.com/blogs/PublicInvest/137324.jsp
