This article first appeared in The Edge Malaysia Weekly on August 5, 2024 - August 11, 2024

Inta Bina Group Bhd (KL:INTA) is a beneficiary of a resurging construction sector, judging from its share price performance over the last one-year period to July 10.

During the period, Inta Bina’s share price more than doubled to 50 sen, valuing the residential construction expert at RM268.66 million. The rally in its share price came after its return on equity (ROE) in the last three years grew, while earnings jumped.

Its ROE increased from 8.23% in the financial year ended Dec 31, 2021 (FY2021), to 14.2% in FY2023, or a three-year weighted average of 10.7% — the highest in the construction sector for companies with a market capitalisation of less than RM1 billion, clinching it the Highest Return on Equity Over Three Years award at The Edge Malaysia Centurion Club Corporate Awards 2024.

In FY2023, when Inta Bina recorded its highest ROE over the last three years, the group made RM22.9 million in net profit, more than double the RM9.5 million it recorded in FY2022. As more of its construction orders are realised, Inta Bina’s net profits are expected to grow further.

At the same time, Inta Bina continues to secure one new contract after another. In the first half of this year, Inta Bina secured RM1.1 billion worth of construction jobs, already exceeding its order book replenishment of RM456.9 million in FY2023 by a quantum of 2.4 times. TA Research believes Inta Bina will be able to secure RM1.6 billion worth of contracts by year’s end — higher than the initial RM1.2 billion contract replenishment target.

Thus, TA Research’s analysts are projecting that Inta Bina’s net profit for FY2024 will grow 16.16% to RM26.6 million. The research firm has adjusted upwards its net profit forecasts for Inta Bina for FY2024F, FY2025F and FY2026F by 1.8%, 13.6% and 27.3% respectively.

TA Research forecasts that Inta Bina’s net profits for FY2025F will grow to RM40.4 million, up 76.42% from FY2023’s RM22.9 million. Can Inta Bina do it?

As at June this year, Inta Bina’s outstanding order book stood at RM1.8 billion, which is 2.77 times its FY2023 revenue of RM650 million. If Inta Bina manages to secure another RM500 million worth of contracts this year, its outstanding order book could grow further.

Among the contracts that Inta Bina managed to secure this year was a RM348.92 million contract for a mixed development in Shah Alam from Eco Ardence Sdn Bhd, a subsidiary of Eco World Development Group Bhd (KL:ECOWLD). The contract runs for 33 months from April 15.

It has also secured a RM224.8 million contract by a subsidiary of Tropicana Corp Bhd (KL:TROP) to build a 38-storey serviced apartment in Subang Jaya, Selangor, which will run for 34 months from May 2.

Inta Bina has also bagged a RM198.7 million contract from a unit of Sime Darby Property Bhd (KL:SIMEPROP) to build three condominium blocks in Ara Damansara. That is expected to take 34 months starting from June 10.

All these jobs will contribute to Inta Bina’s net profit this year and over the next two years. The group’s earnings are already showing signs of high growth this year, with first-quarter results jumping 74% from the RM7.1 million it made a year ago.

“The recovery of the construction sector is expected to benefit Inta Bina, particularly with the launch of new residential projects that were delayed in FY2022 because of high input costs,” says TA Research in a May 29 report, following the release of Inta Bina’s first-quarter results.

Inta Bina is optimistic that government initiatives such as iMILIKI — a stamp duty exemption programme — together with the Housing Credit Guarantee Scheme and Madani Neighbourhood affordable housing projects will help first-time home buyers and spur residential demand.

In the meantime, the non-residential building subsector is expected to pick up, particularly with the realisation of approved private investments. In the first three months of the year, Malaysia registered approved private investments of RM83.7 billion, up 13% year on year.

Up to April this year, when Inta Bina published its 2024 annual report, the group had completed more than 149 construction projects, including residential and commercial buildings, valued at more than RM4.1 billion.

“We will continue to play to our strengths in the construction sector. Currently, our unbilled orders for ongoing projects total RM1 billion. To sustain the group’s earnings, we will not only grow our order book but also enhance our cost structure to improve profit margins,” says Inta Bina.

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