Advancecon Holdings Bhd

Transcription

1 Advancecon Holdings Bhd Unearthing Potential By Lum Joe Shen l lumjs@kenanga.com.my Via its IPO, Advancecon Holdings Bhd (ADVCON) will be raising RM56.7m with a market capitalisation of RM253m. Current outstanding order-book is at healthy level of RM572m providing visibility for the next 2 years. We expect more contract wins from the infrastructure space as ADVCON is targeting larger contracts of above RM50m and mobilizing more machineries into East Malaysia to tap opportunities there starting with the Pan Borneo project. SUBSCRIBE with a TP of RM0.85 based on 10x FY18 PER. IPO to raise RM56.7m based on 90m new shares at IPO price of RM0.63. The enlarged share capital of 402.1m shares indicates a market capitalization of RM253.3m. Utilization of proceeds is mainly on machinery capex, construction of a new workshop, debt repayments and working capital requirements. Major shareholders include Dato Phum Ang Kia (23.7%), Lim Swee Chai (12.7%) and Pham Soon Kok (7.3%). Earthworks specialist with reputable clients. Being 27 years in the earthworks space, ADVCON has a proven track record of hundreds of completed jobs under their belt. Most jobs accepted by ADVCON for the past 3 years were from recommendations/invitations except for the WCE package and Kota Puteri project (Rawang) whereby it was won through open tender. ADVCON has gained a set of reputable clients as their recurring clients namely SPSETIA and ECOWLD along the years. While we believe that the execution of earth and road works is relatively simpler compared to building works, we note that it is still not easy to breach the barrier to be a specialized earthworks contractor capable to take on large projects given the amount of CAPEX required. Due to ADVCON s experienced management team coupled with the extensive range of machineries, ADVCON has emerged as one of the biggest earthworks contractors within this relatively fragmented earthworks space in Malaysia. Less affected by slowdown in Malaysian property market. We believe that ADVCON which specializes in earthworks are less affected by the slowdown in the property development space as they could still actively bid within the infrastructure space with clearer replenishment visibility with impending jobs such as HSR, ECRL, SUKE, DASH and Pan Borneo. Earnings forecast. We are forecasting FY17-18E CNPs of RM m on the back of: (i) outstanding order-book of RM572m as of 19 th May 2017, and (ii) order-book replenishment target of RM m for FY17-18E with a remainder of RM216m to be achieved for the remainder of FY17. We highlight that ADVCON s FY17-18E net margins of 11% and 2 year fwd CAGR earnings growth of 15% is superior against peers average FY17-18E net margins of 9.6% and 2 year CAGR growth of 9% respectively. That said, we note that our expected FY17-18E net gearing of 0.3x-0.2x remains inferior to peers. SUBSCRIBE with a TP of RM0.85 based on 10x FY18 PER. Despite the slight discount over peers average PER of 11x, we believe our applied 10.0x PER valuation is fair given the ADVCON s market cap which remains much smaller against peers coupled with their higher net gearing. Nonetheless, we note that their above average PAT margins of 11% along with FY17-18E earnings growth of 21%-9% (implying 2-year. CAGR of 15%) provides a buffer for their shortcomings. We like to highlight that ADVCON IPO price of RM0.63 implies. FY18 PER of 7.2x which is a very attractive level versus peers current trading range of x. SUBSCRIBE IPO Price: Target Price: Share Price Performance RM0.63 RM0.85 KLCI 1, YTD KLCI chg 8.4% YTD stock price chg n.a. Major Shareholders Dato Phum Ang Kia 23.7% Lim Swee Chai 12.7% Pham Soon Kok 7.3% IPO proceeds (RM m) CAPEX 29.7 Debt repayment 12.5 Working cap 10.7 Estimated Listing expenses 3.8 Total 56.7 Summary of IPO Enlarged Share Cap (m) IPO Price (RM) 0.63 Market Cap Upon Listing (RM m) Summary Earnings Table FY Dec (RM m) 2016A 2017E 2018E Turnover EBIT PBT Net Profit (NP) Core NP Consensus (CNP) n.a. n.a. n.a. Earnings Revision n.a. n.a. n.a. Core EPS (sen) Core EPS growth (%) -12% 21% 9% NDPS (sen) BV/Share (RM) Core PER (x) Price/BV (x) Net Gearing (x) Net Div. Yield (%) 0.0% 2.5% 2.8% PP7004/02/2013(031762) Page 1 of 11

2 IPO DETAILS Raising RM56.7m. ADCON will be issuing 90.0m new shares at RM0.63/share where allocations for institutional offering is 41%, retail at 33% and MITI approved Bumiputera investors at 20%. Based on IPO price, implied market capitalisation is at RM253.3m which we classify as within our small mid-cap contractor space. Private placement of 33.0m existing shares. In addition to the newly issued shares, ADVCON s promoters will privately place out 33.0m existing shares to identified Bumiputera investors approved by MITI. New share issuance and offer for sale Categories Number of shares million % of new shares % of enlarged share cap Retail offering Malaysian Public (for ballot) 15 17% 3.7% Bumi allocation (for ballot) 15 17% 3.7% Eligible directors and employees 5 6% 1.2% Institutional offering 37 41% 9.2% Identified Bumi investors approved by MITI 18 20% 4.5% Total % 22.4% Existing shares Offer for sale % Utilisation of IPO proceeds and IPO timeline. The main bulk of the IPO proceeds will be used for CAPEX (53%) which includes the: (i) purchase of new machinery and equipment, and (ii) construction of new workshop while the remaining proceeds would be used for the repayment of bank borrowings (22%) and working capital needs (19%). The closing date for shares subscription falls on 28 th June 2017 at 5pm, while the listing is on 10 th July Utilisation of IPO Proceeds Details Estimated timeframe for utilisation RM m % 1. Capex a) Purchase of new construction machinery and equipment Within 12 months % b) Construction of new workshop Within 24 months % 2. Repayment of bank borrowings Within 6 months % 3. Working capital Within 24 months % 4. Estimated listing expenses Upon listing 3.8 7% % Breakdown of Proceeds for machinery and equipment Capex Number Purchase cost (RM m) Avg Purchase cost/unit (RM m) Excavator (13t-20t capacity) Excavator (48t capacity) Motor Grader Tipper truck (Capacity weight of 60t) Indicative IPO Timeline Event Launch of Prospectus Closing of application Balloting of application Allotment Listing Source: Bursa, Company Date 19-Jun June-17, 5pm 30-Jun-17 6-Jul Jul-17 PP7004/02/2013(031762) Page 2 of 11

3 INVESTMENT MERITS Experienced earthwork specialist led by a team of veterans. ADVCON has been in the construction industry for 27 years with a proven track record of hundreds of completed jobs under their belt. In the past 3 years, all of the jobs won by ADVCON were through recommendations/invitations except for its recently secured WCE package (RM239.8m) and Kota Puteri project in Rawang (RM12.9m) which was won through open tender. We believe this is due to their experienced management team headed by Dato Phum (Group CEO), Mr Lim Swee Chai (Deputy Group CEO), Ir. Yeo An Thai (COO) and their respective team of general managers who have extensive experience within the Earthworks construction space (refer to Appendix for more). Leaders in the space. While we believe that the execution of earth and road works is relatively more straight-forward compared to building works within the construction space, we note that the barrier of entry is still relatively high especially for specialized for larger scale earthworks projects. This is due to the huge amount of CAPEX required coupled with the immense project management needed. Due to ADVCON s experienced management team coupled with the extensive range of machineries with a NBV of c.rm81m (as of May-17), ADVCON has emerged as one of the biggest earthworks contractors within this relatively fragmented earthwork space in Malaysia. We note that other larger earthworks contractors within the space comparable to ADVCON are GADANG and Menta (not listed) which were responsible for the earthworks portion in RAPID Pengerang. However, given the rising amount of jobs within the infrastructure space, we are positive on ADVCON s prospects as we believe there are abundant earthworks jobs within the space to be distributed amongst these contractors. We also believe the lack of large scale earthworks contractors has contributed to ADVCON s outstanding GP margins of >20% in the past 3 years - superior compared to other small mid-cap building contractors within our coverage namely KIMLUN, MITRA, KERJAYA and HSL at 16-19%. ADVCON s list of Machineries Age Profile Machineries 1-3 years 4-7 year >8 years Total Post IPO EARTHWORKS Excavator Bulldozer Compactor Dumptruck Tipper truck Long arm Amphibious Undercarriage EARTHWORKS SUPPORT Water truck Diesel truck Crawler drill Compressor Back pusher Motor Grader Wood crusher plant CIVIL ENGINEERING Backhoe Hydraulic Breaker Shovel Hydro crusher Forklift Others* SUPPORT SERVICES Crusher plant Trailer Lorry Motor Vehicles Less affected by slowdown in Malaysian property market. ADVCON is slightly different compared to general contractors which job replenishments is reliant on building works where a slowdown in the property market would lead to tepid earnings growth given the lower jobs opportunity coupled with more competitive rates. While we note that ADVCON was heavily involved in earthworks in township developments previously, they have started to gear towards the infrastructure space with major infrastructure contracts being secured recently i.e. WCE and Pan Borneo. Hence, moving forward, we believe that ADVCON would be less affected by the property slowdown as they can actively bid within the infrastructure space whereby replenishment visibility is clear with impending jobs such as HSR, ECRL, SUKE and DASH. We note that 64% of their current outstanding order-book of RM572m (as of 19 th May 17) are infrastructure related jobs while the remainder are residential/commercial (Refer to Appendix for ADVCON s list of outstanding projects). In addition, management highlighted that moving forward, they would be focusing to secure jobs within the infrastructure space with value of more than RM50m. PP7004/02/2013(031762) Page 3 of 11

4 Recurring set of reputable clients. With 27 years of track record, ADVCON has gained a set of reputable clients as their recurring clients namely SPSETIA and ECOWLD, which are developers that have achieved the industry s highest annual sales with sizeable exposure to township developments. They were responsible for the earthworks at major developments by these two big cap developers i.e. Bandar Setia Alam, Setia EcoHill, Setia Eco Gardens, Eco Majestic, Eco Business Park 1&2. We note that from FY14-16, SPSETIA and ECOWLD contributed a major portion of ADVCON s revenue ranging from 42%-56%. Moving forward, we believe ADVCON will continue to benefit from the future developments of these two developers which have a remaining land bank* of 7,266ac with GDV worth RM69.4b. Note that we had filtered out land banks which are >100 acres as we believe a specialized contractor like ADVCON prefers to execute the extensive earthworks for these township developments. Based on channel checks we understand that the earthworks portion could range from 10% to as high as 30% of total development construction cost. Hence, assuming a 20% construction cost/gdv, the amount of remaining earthworks by these two developers alone could range from RM b in the next years providing ADVCON a robust replenishment visibility within the residential/commercial space. ECOWLD and SPSETIA s remaining land bank* ECOWLD Remaining landbank Remaining GDV Selangor Eco Majestic Selangor Eco Forest Selangor Eco Grandeur Johor Eco Business Park V Selangor Eco Ardence Johor Eco Tropics Penang Eco Horizon & Eco Sun Johor Eco Business Park I Johor Eco Business Park II Johor Eco Business Park III SPSETIA Remaining landbank Remaining GDV Johor Setia Tropika Johor Setia Eco Gardens Selangor Setia Alam Selangor Setia Eco Park Selangor Setia Eco Hills Selangor Setia Eco Hill Selangor Setia Eco Templer *filtered out landbanks which are >100 acres whereby specialized earthwork contractor required for the size. Expanding their reach. ADVCON has successfully secured their first Pan Borneo earthworks project in December 2016 worth RM104.3m. We note that ADVCON s portion of works spans 34.5km which is part of the Sg Awik Bridge Bintagor stretch and is slated for completion in November Given that ADVCON s previous works were predominantly in Peninsular Malaysia, we note that most of the RM15.1m machinery CAPEX from the IPO proceeds would be channelled to East Malaysia for the Pan Borneo project. With these new machineries in place, we believe ADVCON would start bidding for more jobs from East Malaysia starting with more earthworks jobs in the on-going Pan Borneo project. Extrapolating from the Pan Borneo contract awarded to ADVCON, we believe there could be c.rm3.0b worth of earthwork jobs up for grabs for the entire 1,060km Pan Borneo Sarawak stretch. For FY17-18E, we are assuming CAPEX of RM25m-RM20m (included IPO proceeds), respectively. Healthy outstanding order-book. In FY16, ADVCON replenished RM588m worth of contracts from 10 separate jobs, a 178% increase over FY15 replenishment. These wins were mainly backed by two large infrastructure jobs namely the WCE package (RM240m) and Pan Borneo Package (RM104m). Given the high replenishment in FY16, we target a more conservative replenishment rate of RM250m in FY17 and RM300m in FY18 on the back of their existing tender-book of RM1.0b as we anticipate substantial resources to be allocated for the jobs secured in FY16. YTD, ADCON has secured four new projects with a cumulative project value of RM34.5m with a remainder of RM216m to be achieved for the remainder of the year. As of 19/5/17, ADVCON s outstanding order-book stood at RM572m providing the group with two years visibility. PP7004/02/2013(031762) Page 4 of 11

5 Orderbook replenishment alongside Revenue since FY14 Source: Bursa, Company INDUSTRY OUTLOOK Less news flows in near term but more execution. In the near term, given that major infrastructure packages i.e. Pan Borneo Sarawak and MRT2 were mostly awarded in FY16 accounting for 60% of the total RM56.2b given out, we are anticipating a decline in contract flows for FY17. That said, we believe contract news flows in FY17 would be supported by LRT3 (RM9.0b), Pan Borneo Sabah (RM12.8b), Gemas-JB Southern track (c.rm9.0b where we understand that 30% would be sub-contracted to local contractors). Collectively, we are expecting contract flow in FY17 to be within the range of RM25-30b which is c.50% lower compared to contracts dished out in FY16. We believe the theme of the year would be focused on earnings delivery with high risks arising from delays and cost overruns. The OBOR initiative. We believe the OBOR initiative by the Chinese government will benefit our local construction sector within the infrastructure space through more project initiatives in order to further strengthen domestic connectivity. OBOR would led to larger infrastructure spending beyond the affordability of our fiscal budget. One of the major infrastructure initiative in Malaysia linked to OBOR is the East Coast Rail Line project (RM55b) funded by the Chinese. We understand that up to 30% of the ECRL works will be awarded to local contractors which spans c.600km connecting Wakaf Baru in Kelantan to the Integrated Transport Terminal in Gombak and then eventually Port Klang. Moving forward, we believe this major economic initiative would provide clearer earnings visibility for our local construction industry in the longer term. Malaysia Singapore HSR. Another mega project to take note is the multi-billion Ringgit Malaysia Singapore High Speed Rail. Reference design packages were recently dished out in early April (time-frame of 12 months) and we anticipate tender for the construction packages to be called in mid FY18 and awards to be dished out likely by end FY18/early FY19. RISKS Payment in kind. Over the years, ADVCON has been acquiring properties from their clients which we believe is another form of payment-in-kind similar to a contra payment. Currently, total investment properties held by ADVCON amounts to RM30m. While we note that the ownership of these properties are not in any way beneficial towards ADVCON s core business, we believe it is essential to build rapport between their clients by cultivating a sense of support and confidence with their clients. That said, the properties that ADVCON had purchased are in relatively good locations with decent discounts obtained from the developers. While these purchases indirectly affect ADCON s cash flow, we note that its free cash flow for the past three financial years are still healthy at levels of >RM20m. Also, we note that RM27m (out of RM30m) of the investment properties or 91% are actually charged to the banks for term loans. Going forward, we believe that ADVCON will likely to continue practicing these paymentin-kinds given that they had incorporated a subsidiary namely Advancecon Properties back in April 2013 to specifically engage in property investments. That said, management has set an investment policy to ensure that total property investment should not exceed 20% of the Group s total asset. As of FY16, investment properties accounted for c.11% of total Group assets. Heavily reliant on subcontractors for other specialized traits. ADVCON relies heavily on sub-contractors for civil engineering works such as roadworks, bridges, and drainage given that they do not have sufficient expertise in these areas. That said, ADCON has been prudently selecting sub-contractors prior to engaging them and prefers to work with trusted subcontractors with previous working relationships. Given that they have recently penetrated the East Malaysia Market through Pan Borneo, we note that finding trustworthy sub-contractors with a good execution track record might not be easy. However, we applaud ADCON s decision to only undertake the earthworks portion for Pan Borneo where very minimal subcontracting works are needed for that portion of works worth over RM104m. PP7004/02/2013(031762) Page 5 of 11

6 FINANCIAL ANALYSIS FY17-18E earnings forecast. We are forecasting FY17-18E CNPs of RM m on the back of: (i) outstanding order-book of RM572m as of 19 th May 2017, and (ii) order-book replenishment target of RM m for FY17-18E with a balance of RM216m to be achieved for the remainder of FY17. Our forecast indicates a CNP growth rate of 21%-9% for ADVCON translating to a 2-year forward CAGR of 15%. We believe such growth rate is achievable on the back of larger targeted infrastructure packages with value of >RM50m as they penetrate into the East Malaysian market, opening up doors for more job opportunities. Comfortable Net gearing. Over FY14-16, ADVCON s net gearing has dropped from a high of 1.0x to 0.77x levels. Post IPO, we expect ADVCON s FY17-18E net gearing of x on the back of our FY17-18E CAPEX assumption of RM25m-20m, which are comfortable levels. We also note that these levels are well within managements comfortable net gearing level of 1.0x. 20% dividend policy. The group has set a 20% DPR dividend policy. We are positive on this as: (i) it shows management s commitment and confidence, and (ii) it is one of the few contractors within the space to have a dividend policy. For FY17-18, we have conservatively assumed that ADVCON pays out the minimum DPR of 20% given that CAPEX allocation would be needed for their Pan Borneo job and enlarged outstanding order-book of RM572m. Peers comparison (MITRA, HSL, KERJAYA, KIMLUN) 1. Peers selection. We have selected MITRA, HSL, KERJAYA and KIMLUN to be part of ADVCON s peers given that (i) KIMLUN and HSL are also involved in the construction of Pan Borneo Highway whereby the contract makes up a large chunk of their outstanding orderbook at 25% and 46% respectively similar to ADVCON (18%), and (ii) MITRA and KERJAYA who prides themselves being a specialist within the building works space, similar to ADVCON who is a specialist within the earthworks space. Market-cap wise, ADVCON along with our selected peers have <RM2.0b market cap which we deem as small mid cap construction players. 2. Outstanding orderbook. ADVCON s outstanding orderbook and YTD replenishment of RM572m and RM35m is at the lower end of the spectrum of peers average outstanding orderbook of RM2.1b and RM323m, respectively. Nonetheless we note that the peers are generally involved in constructions of building and infrastructure works where contract value is typically larger and the related earthworks/roadworks form a subset of the total contract. However, in ADVCON s case, contracts secured are typically specialized or larger standalone earthworks packages as a separate package from building contracts. 3. Net Margins. Net margins wise, we are expecting 11% PAT margins for FY17-18E which is above peers average of 9.6%. Our forecasted margins for ADVCON are the same as its previous 3 financial years (FY14-FY16) which registered stable net margins of 11% in a row. We believe ADVCON could achieve such margins due to: (i) the specialized earthworks which requires more technical capabilities, and (ii) less competition within the relatively fragmented earthworks space. We note that their margins are on par with KERJAYA which specializes in building construction using aluminium formwork industrial building systems (IBS). 4. Earnings growth. ADVCON s is expected to chart a 21-9% FY17-18E CNP growth equivalent to a 2-year. CAGR of 15% above peers average of 9%, which is the second highest amongst our coverage behind KERJAYA which charts a superior 2-year. CAGR growth of 21%. 5. Net gearing. Balance sheet wise, ADVCON s FY17 net gearing of 0.3x remains inferior to peers with KERJAYA and HSL in net cash position while KIMLUN and MITRA are at 0.1x and 0.3x, respectively. We note that this is due to the nature of ADVCON s business which requires extensive CAPEX allocations especially for trucks and excavators. That said, we expect ADVCON s net gearing to come off to 0.20x in FY18 (from 0.3x in FY17) which would then be at healthier level compared to MITRA. 6. Dividend pay-out ratio and yield. While ADVCON s FY17E DPR of 20% is at the lower-end compared to peers range of 20-33%, we note that we are being conservative on our assumption and that ADVCON s FY17E DPR could potentially have further upside. We also highlight that ADVCON is the only one among its peers with a dividend policy in place. That said, ADVCON s IPO price of RM0.63 implies FY17E dividend yield of 2.5% - just slightly higher than peers average of 2.3%. Peer Comparisons (Part 1) Last Market Outstanding YTD Earnings FY17 PAT FY18 PAT Peers Price Cap orderbook secured Visibility Margins Margins ADVCON % 11.4% MITRA % 9.9% KERJAYA % 11.3% HSL % 9.7% KIMLUN % 7.3% Average % 9.6% Source: Bloomberg, Kenanga Research PP7004/02/2013(031762) Page 6 of 11

7 Peer Comparisons (Part 2) Peers FY17 FY18 2 year CAGR FY17 Net Gearing FY18 Net Gearing Historical EPS FY17 EPS FY18 EPS ADVCON 21% 9% 15% MITRA 5% -3% 1% KERJAYA 26% 16% 21% NC NC HSL 9% 21% 15% NC NC KIMLUN -14% 11% -2% Average 6.5% 11.1% 9% Source: Bloomberg, Kenanga Research Peer Comparisons (Part 3) Peers FY17 DPS (sen) Div Policy DPR FY17 Div Yield FY17 PER FY18 PER ADVCON 1.60 Yes 20% 2.5% MITRA 5.00 No 33% 3.6% KERJAYA No 24% 1.6% HSL No 20% 1.4% KIMLUN 5.80 No 25% 2.6% Average 25% 2.3% Source: Bloomberg, Kenanga Research VALUATIONS SUBSCRIBE with a TP of RM0.85. We value ADVCON at RM0.85 based on 10x FY18E PER, being a 10% discount over our peer average of 11x (target small-mid cap contractors range: 9.0x-13.0x). The discount is due to ADVCON s market cap being much smaller comparatively to peers coupled with their higher net gearing, while we note that their above average PAT margins of 11% along with FY17-18E earnings growth of 21%-9% provides a buffer for their shortcomings. We highlight that ADVCON IPO price of RM0.63 implies FY18 PER of 7.2x which is at a very attractive level versus peers current trading range of x. Overall, we like ADVCON s as a specialized earthworks contractor as we believe that they are in a better position compared to general contractors right now given the subdued property market but thriving infrastructure space. APPENDIX Key Management Team Name Designation Background and Key Achievements Dato Phum Ang Kia Group Chief Financial Officer - With approximately 40 years of working experience in the construction industry, he is responsible for the Group s overall business development which includes setting the Group s direction, formulating corporate development plan and driving business growth. - Involved in overseeing the daily on-site operations as Lim Swee Chai Deputy Group Chief Financial Officer well as contracts and operations related matters years of working experience in the construction industry, he is responsible for the Group s overall strategic management, strategic corporate planning and oversee contracts and operations related matters. Ir. Yeo An Thai Chief Operating Officer - With approximately 19 years of working experience in the construction industry, he is responsible for the overall operations of the Group which include decision making on corporate affairs and managing site technical operational activities of the Group. - Graduated with a Bachelor of Engineering with Honours Degree in Civil and Structural Engineering from Universiti Kebangsaan Malaysia in 1997 and subsequently obtained a Master of Engineering Management from Universiti Putra Malaysia in He is a registered Project Management Professional with the Project Management Institute, United States since 2009, a member of the Institution of Engineers, Malaysia and a registered Professional Engineer with the Board of Engineers, Malaysia since In 2014, he registered as a Green Building Index Facilitator with Green Building Index, Malaysia. PP7004/02/2013(031762) Page 7 of 11

8 ADVCON s outstanding orderbook On-going Project Contract Value Commencement date Completion date Stage of completion as of 19/5/17 Remaining contract value Earthworks and infra at Kota Puteri Rawang, 13 Oct-15 Aug % 5 Selangor Earthworks, maindrain, alignmnent of rivers for 16 Jul-15 Aug % 4 Bandar Bukit Raja Infra & landscaping at Bukit Jalil, KL (roadworks 63 May-16 Jun % 1 bridge) Site clearance, earthworks and infra at Eco 114 Nov-13 Mar % 23 Majestic, Hulu Langat Earthworks at Bukit Raja, Seksyen U12, 35 Nov-16 Jun % 17 Selangor Site clearing, earthworks for Seri Serai at 14 Aug-16 Jul % 8 Rawang, Gombak, Selangor Site clearing, earthworks for Seri Serai at 6 Feb-17 Jul % 6 Rawang, Gombak, Selangor Earthworks for Setia Eco Glades, Dengkil 54 Jul-12 Aug % 12 Site clearing, earthworks and infra for Setia 53 Mar-16 Sep % 31 Ecohill 2, Selangor Earthworks at Tropicana Aman, Kuala Langat 137 Apr-15 Sep % 39 Selangor Eartworks for Lot 48731, Petaling Selangor 7 Mar-17 Jan % 6 Earthworks for mixed development at Ijok, 60 Dec-16 Feb % 55 Selangor WCE Interchange works (Earthworks, Road, 240 Dec-16 Jun % 239 Drainage, Bridge) Earthworks for Pan Borneo S'wak (Sg Awik 105 Dec-16 Nov % 104 Bridge-Bintagor) CMS:BPURI Drain works for Bandar Serai Rawang, Gombak 7 Apr-17 Jan % 7 Roadworks for east lake central park Tanjung dua belas, Kuala Langat 15 Apr-17 Jan % 15 ADVCON Corporate Structure PP7004/02/2013(031762) Page 8 of 11

9 Income Statement Financial Data & Ratios FY Dec (RMm) 2014A 2015A 2016A 2017E 2018E FY Dec (RMm) 2014A 2015A 2016A 2017E 2018E Revenue EBITDA Turnover (%) 32% -11% 23% 6% Depreciation (12.2) (14.7) (16.2) (18.0) (22.8) EBITDA (%) 29% -1% 16% 12% OP Operating Profit (%) 32% -5% 18% 7% Other Income PBT (%) 34% -7% 21% 9% Interest Exp (4.2) (4.9) (5.7) (5.4) (5.0) Net Profit (%) 40% -12% 21% 9% Associate EI Profitability (%) PBT EBITDA Mar 23% 23% 25% 24% 25% Taxation (8.4) (10.0) (10.7) (13.0) (14.1) OP Margin 17% 17% 18% 18% 18% MI PBT Margin 15% 15% 16% 16% 16% Net Profit Net Margin 11% 11% 11% 11% 11% CNP ETR -28% -25% -29% -29% -29% ROA 10% 11% 9% 9% 9% Balance Sheet ROE 34% 32% 25% 17% 16% FY Dec (RMm) 2014A 2015A 2016A 2017E 2018E PPE DuPont Analysis Intangible Net Margin (%) 11% 11% 11% 11% 11% Other FA Asset T/o (x) Inventories Leverage (x) Receivables ROE (%) 34% 32% 25% 17% 16% Other CA Cash Leverage Total Assets Debt/Asset (x) Payables Debt/Eq (x) ST Borrowing Cash/(Debt) (57.4) (60.0) (72.1) (46.9) (31.1) Other ST Liab Net D/E (x) LT borrowing Other LT Liab Valuations Minorities Int Core EPS Net Assets DPS (sen) FD PER (x) Share Capital Div. Yid (%) 0.0% 0.0% 0.0% 2.5% 2.8% Sh Premium FD BVPS Reserves P/B (x) RE Total Equity Cashflow Statement FY Dec (RMm) 2014A 2015A 2016A 2017E 2018E Operating CF Investing CF (3.4) (34.4) (2.8) (40.0) (30.0) Financing CF (34.5) (6.4) (15.1) 35.6 (7.0) Change cash (5.8) (8.2) Free CF (22.9) 22.8 Source: Kenanga Research PP7004/02/2013(031762) Page 9 of 11

10 Peer Comparison CORE COVERAGE NAME Price (23/6/17) Mkt Cap PER (x) Est. Div. Yld. (RM) (RMm) Actual 1 Yr Est. ROE P/BV Net Profit (RMm) 1 Yr NP (%) (%) (x) Actual 1 Yr NP Target Price (%) (%) (RM) Rating YTD (%) EVERSENDAI CORP BHD % 6% % 14% 0.80 Underperform GAMUDA BHD % 10% % 5% 5.45 Market Perform 14.0 IJM CORP BHD % 6% % 11% 3.51 Market Perform 6.6 KIMLUN CORP BHD % 12% % 11% 2.27 Market Perform 8.2 MUHIBBAH ENGINEERING (M) BHD % 11% % 5% 2.74 Market Perform 21.5 HOCK SENG LEE BERHAD % 8% % 21% 1.50 Underperform 1.9 WCT HOLDINGS BHD % 5% % 13% 1.83 Underperform 18.6 MITRAJAYA HOLDINGS BHD % 15% % -3% 1.49 Market Perform 8.7 SUNWAY CONSTRUCTION GROUP BH % 25% % 1% 2.00 Market Perform 18.8 KERJAYA PROSPEK GROUP BHD % 15% % 16% 3.10 Market Perform 49.3 ADVANCECON HOLDINGS BHD % 17% % 9% 0.85 SUBSCRIBE n.a. Average NOT RATED/ON OUR RADAR NAME Price Mkt Cap PER (x) Est. Div. Yld. (RM) (RMm) Actual 1 Yr Est. ROE P/BV Net Profit (RMm) 1 Yr NP (%) (%) (x) Actual 1 Yr NP Target Price (%) (%) (RM) Rating YTD (%) MUDAJAYA n.a. n.a. n.a % 37% n.a. Not Rated 50.5 PROTASCO % 14% % 1% 1.36 Trading Buy -6.2 PINTARAS JAYA % 13% % 20% 4.2 Trading Buy 13.9 GABUNGAN AQRS % 1% % 98% 1.51 Trading Buy 56.9 GADANG HOLDINGS % 18% % 5% 2.44 Not Rated 22.9 AZRB n.a. 2% n.a. n.a n.a. 12% n.a. n.a. Not Rated 73.2 TRC SYNERGY % 8% % -20% n.a. Not Rated 86.8 BINA PURI n.a. n.a. n.a % 0% n.a. Not Rated -6.9 GEORGE KENT % 21% % 13% 2.8 Trading Buy 37.8 PESONA % 22% % 37% Take Profit 5.8 JAKS % 13% % 38% 1.54 Not Rated 46.1 Average Source: Bloomberg, Kenanga Research PP7004/02/2013(031762) Page 10 of 11

11 Stock Ratings are defined as follows: Stock Recommendations OUTPERFORM : A particular stock s Expected Total Return is MORE than 10% MARKET PERFORM : A particular stock s Expected Total Return is WITHIN the range of -5% to 10% UNDERPERFORM : A particular stock s Expected Total Return is LESS than -5% Sector Recommendations*** OVERWEIGHT : A particular sector s Expected Total Return is MORE than 10% NEUTRAL : A particular sector s Expected Total Return is WITHIN the range of -5% to 10% UNDERWEIGHT : A particular sector s Expected Total Return is LESS than -5% ***Sector recommendations are defined based on market capitalisation weighted average expected total return for stocks under our coverage. This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees. Kenanga Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies. Published and printed by: KENANGA INVESTMENT BANK BERHAD (15678-H) Level 12, Kenanga Tower, 237, Jalan Tun Razak, Kuala Lumpur, Malaysia Telephone: (603) Website: research@kenanga.com.my Chan Ken Yew Head of Research PP7004/02/2013(031762) Page 11 of 11