Author: PublicInvest | Publish date: Tue, 19 Dec 2017, 08:45 AM
Chin Hin announced the securing of an RM238.3m contract through 70%-owned Metex Modular Sdn Bhd for the construction of an integrated workers complex with comprehensive facilities in Pengerang, Johor. The works will take a year, and will be recognized in FY18. Given the recent temporary setback in its wire mesh division, this development is certainly a very much welcomed and a significant one in its evolution toward being a solutions provider from its current core strength as an integrated distributor and manufacturer of building materials. We gather pretax margins are about 20%, though we take a conservative stance in assuming 10% given that this is the Group’s maiden foray. FY18 EPS should increase by 2sen (+19.2%), resulting in a raised target price of RM1.67 (RM1.40 previously). We continue to like Chin Hin’s growth prospects and affirm our Outperform call, remaining assured of its strong growth prospects 2018 and beyond, underpinned by 1) contributions from its capacity expansions in the autoclaved concrete and precast concrete businesses, 2) growing contributions from recent earnings-accretive acquisitions, and 3) high chances of securing of more contracts by Metex Modular.
The contract, as indicated earlier, is for the construction of an integrated workers complex in Johor and has been awarded by Saujana Vision Sdn Bhd, a company listed as a contractor of construction works. Running for only a year effective 1 Jan 2018, contributions are expected to be recognized entirely in FY18, with works undertaken utilizing the PPVC concept.
Prefabricated Prefinished Volumetric Construction (PPVC) is a method whereby free-standing volumetric modules (complete with finishes for walls, floors and ceilings) are manufactured/constructed and assembled in an accredited fabrication facility, and then installed in a building under building works. PPVC is reportedly a game-changing technology that supports the concept of Design for Manufacturing and Assembly (DfMA) which significantly speeds up the construction process. Metex Modular Sdn Bhd was recently incorporated for this very purpose, allowing the Group to synergistically tap on various internal resources (ready-mixed concrete, AAC blocks and wall panel, wire mesh, C-Purlin, etc) and delve into the Industrial Modular Building System space in a bigger way, in line with the government’s call for mandatory usage of Industrialized Building Systems by 2020.
Source: PublicInvest Research - 19 Dec 2017
