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Its IPO price of MYR0.25 implies a historical FY16 P/E of 12.2x. Based on
annualised 5M17 earnings, KA trades at a prospective FY17 P/E of 11.7x.
In comparison, the Bursa Malaysia Construction Index trades at a 2017 Statistics
P/E of 15.0x.
Free float (%) 31.5
Issued shares (m) 320.0
M&E expert seeking listing Market capitalisation MYR80.0M
Kejuruteraan Asastera Bhd (KA), an electrical and mechanical expert, USD19.1M
will be listed on the ACE Market of Bursa Malaysia Securities Bhd on 17 Major shareholders:
Nov 2017. The company is issuing up to 80m new shares at MYR0.25 each Dato Lai 61.3%
Choong GS 3.8%
to raise MYR20m. There is also an offer for sale of 32m shares by way of
Malaysia
FYE Dec (MYR m) FY14 FY15 FY16 Utilisation of IPO proceeds MYR20m
Revenue 57.0 87.1 93.1
EB ITDA 5.3 6.2 9.4
Co re net pro fit 3.9 4.5 6.6
Co re FDEP S (sen) 1.2 1.4 2.0 Estimated
listing
Co re FDEP S gro wth (%) - 17.4 44.1 expenses
Repayment of 18%
Net DP S (sen) - - - borrowings
Co re FD P /E (x) 20.7 17.6 12.2 8%
P /B V (x) 11.3 7.5 5.0 Setting up Working
new offices Capital
Net dividend yield (%) - - - Capital
3% 60%
Expenditure
ROA A (%) - 11.2 10.6 11%
EV/EB ITDA (x) 15.0 12.9 8.5
Net gearing (%) (incl perps) 42.8 97.6 13.6
Co nsensus net pro fit - - -
M KE vs. Co nsensus (%) - - -
Source: Company
THIS REPORT HAS BEEN PREPARED BY MAYBANK INVESTMENT BANK BERHAD PP16832/01/2013 (031128)
SEE PAGE 6 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
Kejuruteraan Asastera Berhad
IPO highlights
An electrical and mechanical expert
Electrical engineering services is KAs core business activity, accounting for 87.2%
of 5M17 revenue (FY16: 92.9%). It involves the installation, testing and
commissioning of electrical systems which comprise:
ELV services: Including services such as access control, car park system and
gate barrier, CCTV, SMATV, security and alarm system, sound system, public
address and intercommunication systems.
The company also provides mechanical engineering services which involve the
installation, testing and commissioning of air-conditioning and mechanical
ventilation systems. This could be awarded as part of the electrical engineering
services contracts or on a standalone basis.
KA: FY16 revenue breakdown by business activities KA: 5M17 revenue breakdown by business activities
Sale of
goods, 7.1% Mechanical,
ELV, 3.2% 0.8%
FTTH, 3.0% Sale of
ELV, 4.4% goods,
FTTH, 3.4% 12.0%
Electrical, Electrical,
86.7% 79.4%
Target markets
KA mainly services the main contractors, project owners and property developers
in Malaysia, either via direct or indirect invitations. The group is not dependent
on any single customer though some of its clients contributed >10% of its revenue
over the past three years. These customers may vary from year to year,
depending on projects and purchase orders.
Over the past three years, KA has been appointed as a nominated subcontractor
for approximately 69.8% of the total number of projects secured. Unlike a normal
subcontractor, a nominated subcontractor is appointed by the project owner,
and the main contractor is obliged to appoint the company as a subcontractor for
the services to be provided. With this status, KA will be able to have direct
negotiations with the project owner on the terms of the subcontract and the
process is less competitive compared to a public tender.
Market share. KA has a market share of just 1.7% in 2016, based on the total
value of awarded electrical engineering services projects versus the total value
of electrical projects awarded in the construction sector. Therefore, there are
abundant opportunities for the group to tap into. Management intends to tender
for more projects post listing, particularly for large scale residential, commercial
and mixed-development projects.
A deeper pocket. Via this listing exercise, KA has earmarked MYR7.5m for tender
bonds/performance bonds to bid for jobs. Without funding, securing large
contracts is a challenge. A performance bond (in the form of bank guarantees),
which is about 5% of the total contract sum award, is required by customers until
after the issuance of the Certificate of Practical Completion. As a private
company, KAs expansion plan has in the past, been limited by its ability to
secure adequate credit facilities for bank guarantees. Based on our back-of-the-
envelope calculation, the MYR7.5m additional funds will enable the group to
bid/undertake jobs up to MYR150m, equivalent to 1.6x its FY16 revenue.
Going south. Another expansion plan is to grow more aggressively into the
Southern region of Malaysia. Historically, KA has focused on projects in the
Central region, particularly in Kuala Lumpur and Selangor. Approximately 98.3%
of its FY16 revenue was derived from the Central region.
Will be in a net cash position. KA will be a net cash company pursuant to the
listing. Based on its pro forma balance sheet (after utilisation of IPO proceeds),
the company will have MYR14.4m net cash, equivalent to 4.5sen per share
(approximately 18% of the IPO price of MYR0.25).
Valuation on the listing day. Based on its pro forma financial statements, KA is
trading at an historical FY16 P/E of 12.2x, at its IPO price of MYR0.25. Based on
annualised 5M17 earnings, KA trades at a prospective FY17 P/E of 11.7x. In
comparison, the Bursa Malaysia Construction Index trades at a 2017 P/E of 15.0x.
While there are other M&E companies listed on Bursa Malaysia, such as Bintai
Kinden, LFE Corporation, Metronic Global, YFG Bhd and AWC (via its subsidiary
Qudotech S/B), most of these companies were loss-making in the latest financial
year. AWC is not a direct comparable as it has three core divisions.
Research Offices
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