Analysts Rate “BUY” Recommendation on CK, Expecting Backlog to Exceed ฿100Bn in 2022

Analysts have given a “BUY” recommendation on CH. Karnchang Public Company Limited (CK), expecting a recovery in backlog in 2H21 and a high growth trend next year, as a projected backlog might exceed 100 billion baht, up from the present 308 billion baht. 

CK began to receive large projects, starting with the Denchai-Chiang Rai-Chiang Khong double-track railway project in collaboration with Sino-Thai Engineering and Construction Public Company Limited (STEC) under the joint venture CKST, with a total project value of 46 billion baht.

The government is expected to open bidding for the MRT Purple Line project worth 116 billion baht and the MRT Orange Line project worth 1227 billion baht in the second and third quarters of this year. 

In 2021, net profit is predicted to range between 976 and 1,022 million baht, up 60-66.9% from the previous year.

 

Maybank Kim Eng (Maybank) reiterated a “TRADING BUY” rating on CK with a target price of 22.00 baht per share, as CK started to win new projects to fill up the backlog from 26 billion baht to 60 billion baht. This year, the management estimates the backlog will rise to 100 billion baht and 200 billion baht in 2022 while entering the new S-Curve. The 2021 earnings will improve. CK invested in the country’s leading infrastructures–BEM, CKP and TTW, worth 59 billion baht, or ฿35/share. They continue to grow in the long term and will help to add to CK’s backlog, as well as increase profit sharing and dividends.

The earnings outlook for the rest of the year—2Q-3Q-4Q21, should recover with better earnings. 2Q21 and 3Q21 will be driven by TTW’s dividends of about 232 million baht and will recognize the new auction in 4Q21. This will bring the 2021 revenue recognition to close to 2020. Moreover, it will also receive profit sharing from investments in BEM and CKP, which is expected to improve from 2020. Maybank maintained its forecast and expected construction revenue to drop to 15 billion baht, down10% YoY, but the profit sharing from investments in BEM and CKP will improve, resulting in a better profit of 888 million baht, (+45% YoY).

 

Asia Plus Securities (ASPS) said CK will finally enter the new S-Curve growth phase after its backlog dropped to its lowest level in ten years over the last three to four years. There are currently 30,816 million baht in backlogs, but if large government construction projects are announced, CK will have a chance to return with a backlog over 100 billion baht.

This year, CK is expected to produce a net profit of 976 million baht, up 60% from the previous year, boosted by a shared profit from CKP. Additionally, when Thailand reopens in the second half of 2021, BEM is likely to rebound.         

 

Asia Wealth Securities (ASW) stated that the earnings outlook for 2Q21 is likely to slow QoQ. This was mostly due to interest income of 382.91 million baht related to construction period extension. And the operational income being flat sequentially despite the company starting a revenue recognition from sewer tunnel project in 2Q21.

However, CK’s revenue from associated companies such as BEM and CKP is likely to increase YoY because of the absence of a lockdown this year.

In the second half of 2021, the company may see a recovery as backlog will come in from 2Q21 onwards.

The company, recently, acquired 2 construction contracts 1) Water Transmission Tunnels along Kanchanaphisek Road and 2) project in Chulabhorn Royal Academy, with a total combined contract value of 8.9 billion baht.

 

Securities	Recommendation	Target Price
Asia Wealth	BUY	29.20 baht
Tisco	BUY	22.50 baht
Maybank Kim Eng	TRADING BUY	22.00 baht
Phillip Thailand	BUY	22.00 baht
Asia Plus	BUY	22.00 baht
DBS Vickers	BUY	22.00 baht