RHB Investment Bank Bhd (RHB Research) has maintained its BUY call on Binastra Corporation Bhd, setting a target price of RM2.21, implying an 18% upside.
The research house said the company ended FY25 on a strong note, posting a core profit of RM90.2 million, up 121% year-on-year, which aligned with their estimates. A projected three-year earnings compound annual growth rate (CAGR) of 132% is expected, driven by order book expansion and diversification into non-residential property projects.
For the fourth quarter of FY25, Binastra recorded a core profit of RM25 million, marking a 63% year-on-year increase. This was supported by a growing number of ongoing projects, with the company's outstanding order book standing at RM3.6 billion as of end-March, more than double the RM1.7 billion recorded a year ago. However, the company's core net margin dipped slightly to 9.2% from 9.9% in 4QFY24 due to the addition of lower-margin data centre projects.
Binastra continues to strengthen its position in the Klang Valley construction sector, securing five mixed development projects from key clients EXSIM Development, Maxim Global, and Platinum Victory. These developers have a combined project pipeline of over RM4 billion that could potentially be awarded to Binastra over the next three to four years.
Beyond the Klang Valley, EXSIM and Maxim are planning projects in Johor Bahru near the Bukit Chagar Rapid Transit System station, with an estimated gross development value of over RM5 billion. RHB Research believes this could translate into contract opportunities worth at least RM2.5 billion for Binastra, with RM1.5 billion expected to be rolled out in FY26. This aligns with the increasing launch of residential units in Johor from 2021 to 2024, as the National Property Information Centre reported.
In the data centre segment, EXSIM is in discussions with four potential off-takers to replace Aperia Cloud Services, which previously took up 10.5MW of the 15MW capacity at EXSIM's first Bukit Jalil data centre (DC1). Should one of these parties secure the 10.5MW, there is a likelihood that the remaining off-takers could occupy EXSIM's second Bukit Jalil data centre, currently under construction.
RHB Research has left its earnings estimates unchanged but introduced FY28 projections, incorporating a contract win target of RM3 billion. The RM2.21 target price remains based on a price-to-earnings ratio of 18 times FY26 earnings. At its current valuation of 15 times FY26 earnings, analysts believe Binastra is trading at an unjustified discount compared to the Bursa Malaysia Construction Index, which traded at 16 times during the 2017 construction upcycle.
Securing new clients in the residential property segment could serve as a key catalyst for the stock, while downside risks include slower-than-expected job replenishment.
Today, after hitting the high near 24,000 in the early session and entering bearish positions, the index fell sharply by nearly over 600 points, immediately recouping yesterday's losses significantly.
Moreover, today it broke the new high again, reaching a maximum of 24,076, but by the end of the market, it fell back by about 70 points, producing a bearish candle. The current trend has not yet been broken, but from the previous low until now, it has risen close to 6,000 points. It is believed that those with positions can continue to hold until there is a clear trend reversal for profit-taking. Those without positions can wait for a pullback to get in. Actually, it is hoped for a quick pullback, as it allows for entry and also provides a healthy breath.
Currently, the outlook remains the same as before. It is believed that even if there is a pullback, it shouldn't be too deep. However, if Futures fail to stabilize and close below 22,350, there may still be room for decline. The chance of Futures falling below 21,400 in the short term should be low, so it is considered that if a significant pullback occurs, it presents a good opportunity to incrementally go long. Recently, there has been a consistent approach to not hold positions overnight, only focusing on immediate trades, as there is no high chasing and no casual short selling.
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