OSK slashes Ahmad Zaki target price

The research house now values the stock at 60 sen apiece, down 66 per cent from RM1.75 previously

OSK Research has slashed its target price on shares of Ahmad Zaki Resources Bhd (AZRB) by 66 per cent as it expects the construction firm's net profit to fall this year.

It now values the stock at 60 sen apiece, from RM1.75 previously. AZRB closed unchanged at 72 sen yesterday.

"We project a 21 per cent contraction in earnings for financial year 2008 and a marginal five per cent growth in 2009," it said in a report released yesterday.

AZRB, controlled by Terengganu businessman Datuk Seri Wan Zaki Wan Muda, posted a net profit of RM4.7 million in the second quarter to June 30 2008, a 36 per cent fall.

Its six-month net profit fell 44 per cent to RM7.2 million. The fall was due to higher raw material prices and the lower value of its stock market investment.

Revenue improved by 58 per cent to RM183 million in the second quarter.

AZRB, which has about RM924 million of orders, is also facing delays in some of its jobs, OSK said. The second phase of a contract to build the Alfaisal University in Saudi Arabia, for instance, will be delayed until September 2009 because it is in talks to include higher material prices in the contract.

AZRB is also bidding for a RM400 million contract to build Universiti Darul Iman in Kuala Terengganu, Terengganu. It is also eyeing extension works for the Kuala Terengganu hospital, which could be worth some RM150 million.

"While we reckon that AZRB has a good chance of bagging these jobs given its strong foothold in the state, we have yet to impute these into our forecasts," OSK said.