Hong Leong Investment Bank has maintained a “BUY” recommendation for Taliworks Corporation Bhd with a slightly higher SOP-driven TP of RM0.97 (from RM0.96) post-earnings adjustments and rolling overvaluation to FY22.
It said that Taliworks’s defensive source of earnings should anchor its healthy sustainable yields of 8.0%. We continue to favour Taliworks for its consistent earnings delivery amidst pandemic uncertainties bolstered by an attractive dividend profile. Key downside risks include execution, higher risk-free rates and return of restrictions.
Taliworks announced a contract win from the Rasau water scheme (Phase 1) worth RM293.9m. This is package 3 of the phase 1 Rasau water scheme where a total of three packages are up for grabs. Air Selangor had previously guided for awards in Nov-21 and Jan-22. Taliworks’s scope of works would include the design and build of the proposed Bukit Lipat Kajang booster station, reservoirs, and associated works. Site possession will be in mid-Dec-21 and the construction phase lasting up to Dec-24.
“We are not surprised by the contract to win as we had earlier highlighted Taliworks as a strong contender for the Rasau project considering its previous water E&C engagements namely Langat 2 reservoir project, Ganchong water treatment works and Mengkuang Dam expansion project just to name a few.”
While HLIB said that this is within expectations, “our earnings forecasts previously did not account for the win pending concrete details. We reckon the PBT margin for the project would fall in the range of 6-8%. We are not expecting more E&C contract wins for Taliworks in the near term given the lack of rollout timeline visibility for water projects in general.”
