KUALA LUMPUR (Dec 20): Rakuten Trade has a “buy” rating on Jati Tinggi Group Bhd at 27 sen with a target price of 38 sen based on 14x over FY24 EPS, slight discount to its listed peers on Bursa Malaysia due to its smaller market capitalisation.
Jati Tinggi, which provides engineering services and solutions for underground and overhead utilities, is set to be listed on the ACE Market of Bursa Malaysia today.
Rakuten said that premised on its (i) existing sizable orderbook (ii) potential to be a key solution provider in the National Energy Transition Roadmap (NETR); (iii) gradual evolution into a main contractor, it expects Jati Tinggi to register core net earnings of RM5.6 million and RM10.8 million for FY23 and F24 respectively.
The research house said Jati Tinggi is also gradually evolving being a subcontractor into a main contractor, which allows for the company to tender for larger projects and improve its profitability.
“To achieve this successfully, Jati Tinggi needs to (i) demonstrate project track record, (ii) availability of technical personnel & machineries, and (iii) financial strength.
“While Jati Tinggi is already competent in the former two, we believe the company will enhance its financial standing by utilising RM7 million from its IPO proceeds to reduce borrowings and RM7.3 million to fund its working capital,” it said.