Crest Builder shares undervalued: Kenanga

SHARES of Crest Builder Holdings Bhd, a construction and property company, are very undervalued based on the firm's potential profits next year.

The stock is trading at a multiple of 4.5 times its 2008 earnings, Kenanga Investment Bank Bhd said in a research report.

This compares with an average multiple of 15 times for construction firms with small market values.

Shares of Crest Builder have gained 10 per cent so far this year, underperforming the broader market's 26 per cent rise in the same period.

"Crest Builder is undoubtedly a deeply undervalued construction and property stock," it said in the report.

The company's main business is construction, with an order book of some RM500 million. However, it ventured into property development in 2005 to boost income.

It is currently bidding for government and private jobs worth more than RM1 billion.

The latest project that it won was the construction of superstructure works for Gateway Kiaramas, a high-end service apartment in Mont Kiara.

Latest Project: Crest Builder won the construction of superstructure works for Gateway Kiaramas, a high-end serviced apartment project in Mont Kiara

Crest Builder's maiden property project, the 3 2 Square, has been well received with a take up rate of some 90 per cent.

"Future earnings from the property division will be underpinned by its property developments in Batu Tiga and Kelana Jaya," Kenanga said.

Kenanga expects Crest Builder's net profit to rise by a third to RM26.5 million in 2007 and by another 17 per cent to RM30.9 million in 2008.

By New Straits Times