KUALA LUMPUR: Ahmad Zaki Resources Bhd (AZRB) could see its stock return increases strongly this year as the stock is currently a compelling buy for value investors due to its sunny outlook.
The stock, which currently traded close to its five-year high of RM1.19, will likely continue its uptrend this year on the back of higher earnings expected for its full year ending December 2017.
While its construction division will keep it busy for the rest of the year on bullish construction industry, the oil and gas (O&G) as well as plantation divisions will also start to play catch up.
Its group chief operating officer Datuk Roslan Tan Sri Jaffar told NST Business that it expects another RM700 million to add to its orderbook of RM3.9 billion this year for its construction division which contributed more than 90 per cent to its topline.
The company's orderbook, which will help sustain its financial performance until 2019, has the potential to breach RM5 billion mark sooner than 2020 or as early as 2018 if it maintains the work momentum every year.
On other earnings growth drivers, Roslan said its O&G division’s Tok Bali supply base in Kelantan will start contributing to its earnings this year whereas its plantation division will achieve a break-even point after RM20 million revenue upside.
"The bullish construction industry that will remain strong up until 2020 bodes well for our company. We are optimistic that we could register high earnings upside this year. I don't think it would be an issue.
"There are a variety of projects that we are going to bid this year. The big projects include Mass Rapid Transit, Light Rail Transit 3 and Tun Razak Exchange infrastructure project.
"We are expecting to see positive indications this year even for our first quarterly result, with other divisions like O&G, property and plantation starting to catch up," he said.
Rakuten Trade analysts said AZRB's stock is a buy as its return is expected to exceed the FBM KLCI benchmark by more than 10 per cent over the next six to 12 months.
They placed a relatively high target price of RM1.42 on AZRB, which indicates that the stock is currently undervalued.
Rakuten Trade expects higher earnings upside for AZRB with forecasted earnings per share growth of 100 per cent this year.