INTA BINA - ROCK BOTTOM GEM

The lack of catalyst in the construction Industry has resulted in the sell down of construction stocks which has hit rock bottom bringing about attractive valuations. The main catalyst the revival of Bandar Malaysia has failed to materialized so far with no news of an extension or a cancellation. The announcement of the revival in April 2019 has brought temporary euphoria to the construction sector as the mammoth project is expected to produce economic multiplier effect to the industry and indirectly the overall economy. It has exceeded the 3 months deadline for the payment of the remainder sum and signing of an actual agreement. We wait patiently for the further development from the Ministry of Finance.
 
In the meantime, there is value to be found in certain construction stocks. One of them is Inta Bina Group Bhd.
 
Inta Bina Group Bhd is a construction company on the main board. It builds various types of buildings including residential, commercial, industrial and leisure properties. It typically acts as the main contractor for its building construction projects that are from developers. Some of the established developers are EcoWorld, Mah Sing and Gamuda.
 
The order books as at June 2019 is at 750 million. It has registered a 41% growth in net profit over last year and expect to continue into the 2nd half of 2019. The annualised eps is expected to be 5 cents for the entire year. At the current price of 26.5 cents it is trading at a PE of 5 which astounding for a company that registered 41% growth in net profit. These book order is expected to tide them for 2 to 3 years. The cash level is at a healthy 37 million.
 
We expect the market to recognized this puzzling discrepancy and rerate it into the region of 35 to 40 cents to reflect PE 7 to 8. Right now, it is sitting sideways 26.5 cent and monitor it for a breakout with volume from here. This is in tandem the coming 3rd and 4th quarter results. Thats a potential 32 to 50% upside.
 

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