Pestech International - Stands Good Chance Of Bidding For More Jobs

Following the announcement of Budget 2014, we believe that Pestech stands a good chance of picking up some jobs from the Government, which is allocating MYR865m for the provision of uninterrupted electricity supply nationwide. In highlighting the frequent electricity supply disruption in Sabah, the Budget is allocating  MYR265m towards  upgrading  the Tenom Pangi  hydro  power  station and  construction of  the Kimanis electricity transmission lines as well as a main switch station in Sandakan. The company’s total orderbook amounts to MYR330m as at end-September 2013.  We  still like Pestech’s  strong  orderbook and growing business opportunities  in  the  local and  overseas markets. Maintain BUY, with an unchanged MYR2.82 FV, pegged to a target P/E of 10x.

Budget 2014 turns spotlight on rural development. As part of its efforts in rural development, the Government is allocating MYR865m for the provision  of  24-hour  uninterrupted  electricity  supply  to  more  than  16,000  homes  nationwide.  It  also  turned  its  attention  to  the  frequent electricity  supply  disruption  in  Sabah  via  a  MYR265m  allocation  to  strengthen  the  state’s  generation  and  transmission  system.  Among  the projects  proposed  in the Budget  are  the  upgrading  of  the  Tenom Pangi  hydro  power  station and the  construction of  the  Kimanis electricity transmission lines as well as a main switch station in Sandakan.

Pestech stands a chance of clinching some jobs. Pestech has several ongoing projects in Sarawak. Besides a few projects in Samalaju Industrial Park  from  OM  Materials (Sarawak) SB and  Asia Cement Co Ltd,  it  has  also won two jobs from Sarawak Energy Bhd (SEB).  Being a reputable specialist of power transmission systems, the company stands a good chance of winning the bids.

Replenishes orderbook by MYR187.8m  YTD.  So far this year, Pestech  has been able to replenish its orderbook by MYR187.8m to MYR330.0m as at end of September 2013.  In September,  it  won a MYR95.6m contract from SEB  to build  a 275/33kV  substation  in Mapai, Sibu.  The job is part  of  the  500kV  transmission  backbone  project  initiated  by  SEB  to  reinforce  Sarawak’s  existing  power  transmission  system  in  case  the existing line breaks down.

Maintain  BUY,  with  MYR2.82  FV.  We believe that Pestech would be one of the forerunners in bidding  for Government jobs given its good reputation and  sound  track record in the power transmission system industry.  We make no changes to our forecasts. Overall, the company’s fundamentals  are unchanged, with  its  strong orderbook  boosting its growth while it  continues to  seek business opportunities in the  local and overseas markets. Maintain BUY, with a FV of MYR2.82, pegged to an unchanged target P/E of 10x.

Source: RHB

Labels: PESTECH