KUALA LUMPUR: Maybank Investment Bank Bhd (Maybank IB) has initiated coverage on Binastra Corp Bhd with a "Buy" call and a target price of RM3.40.
The firm forecasted a three-year forward earnings compound annual growth rate of 21 per cent for the company, assuming annual job wins of RM2.5 billion.
"In our view, Binastra's net cash balance sheet position also gives it the valuable option to raise its dividend payout ratio from more than 50 per cent currently," it said in a note.
"As the executive directors do not receive salaries but are incentivised by dividends as a reward, we believe high dividend payouts are sustainable, which would also benefit minority shareholders."
The firm noted that Binastra Operating Franchise has more than 40 years of construction experience and has completed 189 projects with a cumulative revenue of more than RM12 billion.
Its current outstanding order book stands at RM6.7 billion over 30 ongoing projects nationwide.
It added that Binastra evolved from a predominantly Klang Valley high-rise residential property contractor into a multi-segment construction group.
"Its current portfolio includes data centres, renewable energy infrastructure, sewage treatment plants and specialised engineering. The latter segments account for 30 per cent of its outstanding order book, but Binastra aims to raise this percentage to 40-50 per cent," it added.
Although these segments yield lower margins, the firm views them favourably as they are turned around quicker than high-rise residential property and will contribute to group net profit faster.
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