Ibraco expects stronger earnings trajectory ahead on KUTS, green hydrogen wave

KUCHING (Aug 30): Ibraco Bhd’s (Ibraco) net profit for its first half of financial year 2024 (1HFY24) fell 51 per cent year on year (y-o-y) to RM11.5 million, impacted by reduced revenue from the property development division, higher administrative and marketing expenses, and increased interest costs.

The gross profit margin in property development fell by 3.8 percentage points to 31 per cent, observed TA Securities Holdings Bhd (TA Research), rimarily due to a less favourable sales mix compared to last year, which saw higher margin sales of commercial properties and completed units at Continew Residences.

“However, property development is expected to see stronger progress in billing recognition in 2H24, driven by the signing of SPAs for Residensi NewUrban, as piling works have already been completed, allowing for immediate recognition once the agreements are finalised,” it said in its analysis today.

“According to management, minimal work was recognised from the Sarawak Second Trunk Road Package A1-A and the KUTS Blue Line-Package 1 due to weather-related delays, land issues, and pending approvals from authorities and clients.

“As these challenges have now been addressed, management expects increased construction activity in the coming quarters.”

Despite a 66 per cent y-o-y drop in 1H24 sales to RM76.4 million, Ibraco’s management remained optimistic about achieving the FY24 sales target of RM400 million, driven by strong anticipated performance in 2H24.

This comes as early take-up rates have been promising, with Residensi NewUrban, a RM529 million affordable service apartment in Petaling Jaya, achieving 35 per cent since its March launch, and The Atrium at Arden City, Kota Samarahan, featuring 36 shoplots with direct access to the Sarawak Cancer Centre, reaching 30 per cent since 1Q24.

TA Research said these projects have yet to contribute to 1H sales, as purchasers are still securing loan financing, but they are expected to boost 3Q sales.

“Additionally, upcoming launches, such as The Northbank Strata titled shops (GDV of RM110 million) and Aster Court, the first serviced apartment in Arden City (GDV of RM337 million), are expected to have a positive impact on 2H sales, thanks to strategic locations and favourable market conditions.

“Ibraco’s current outstanding orderbook of RM1.1 billion provides a solid earnings outlook for its construction division through FY27.

Despite this, Ibraco continues to actively bid on new projects, reflecting its commitment to growth.”

With a proven track record in diverse infrastructure projects, TA Research said Ibraco is well positioned to benefit from Sarawak’s extensive infrastructure plans aimed at achieving developed state status by 2030.

The group is expected to participate in tenders for key projects, including airport expansions, water supply grids, Kuching Urban Transportation System (KUTS) packages, and green hydrogen facilities.

“The KUTS Green Line, a 30 km segment from Pending to Damai in Kuching, and the Blue Line Package 2, covering 7km from Stutong to Hikmah Exchange, are significant components of the KUTS.

“The Ibraco-led consortium, which won Package 1 of the Blue Line in November 2023, is still actively bidding for these critical projects.

“According to management, Ibraco’s active tender book stands at RM2.3 billion, including tenders for both the KUTS Blue Line Package 2 and the Green Line.”