KUALA LUMPUR. September 25. KAZINFORM. LCL Corporation Bhd, an interior fit-out (IFO) company, is expected to be the front-runner in reaping the benefits from the $13 billion ($1=RM3.43) expansion plan to be undertaken by Kazakhstan's administrative capital Astana, over the next four years, an analyst said today. In a research note, TA Securities Holdings Bhd analyst, Kamarulzaman Hassan, said LCL's business opportunities in Kazakhstan were enormous given that it has established a joint venture with a counterpart in Kazakhstan which is a strong household name. The company, LCL-SC Interior Creations LLP.LCL-SC, is a joint venture between LCL and JSC Stroy Contract, a Kazakhstan-based property developer and construction company. LCL owns 51 percent of the joint venture, Kazinform cites Bernama. "We believe the joint venture will serve LCL favourably as the group will be able to get continuous work from Stroy. Additionally, the joint venture entity will also enable it to bid for more local projects given the strong brand name of the local partner and its connections," he said. JSC Stroy is one of the top property developer and construction companies in Kazakhstan. Before the jont venture, LCL had smaller IFO contracts from JSC Stroy. Kamarulzaman said so far, LCL has completed RM25 million worth of projects in Kazakhstan and its current order book stood at RM15 million. "The group has aggressively bid for more than RM360 million worth of contracts in Kazakhstan and expects to know the results of some of the bids soon," he said. He said based on the discussions with JSC Stroy's management, the group has secured projects worth $550 million in the near term focusing on Astana and Almaty. "This will certainly be good news to LCL as we can expect most of the IFO projects to be undertaken by the joint-venture entity. As such, we are not surprised to see LCL's confidence in achieving a turnover of $50 million in 2008 before accelerating at a faster pace in the consecutive years," he said. Kamarulzaman said in Kazakhstan, IFO constituted a huge part of the development expenditure. "According to a Kazakhstan government architect, IFO works alone can fetch between 25-40 percent of the total development value given that most of the property owners want their buildings or houses to be different from others. "This has resulted in strong demand for IFO and has pushed the IFO cost in Kazakhstan to between $1,200 and $1,500 per sq meter compared with between $600 and $800 in Dubai and between $100 and US300B in Malaysia," he said. He said based on the assumption that 75 percent of the IFO for JSC Stroy projects worth $550 million were given to LCL, 25 percent of the development value was for IFO and the tenure of the project was three years, the joint-venture entity could see a sales of $34.4 million for financial year ending Dec 31, 2008. "Based on its 2006 financial result of net margin of 7.6 percent, the joint-venture entity is expected to report its maiden net profit of RM9.1 million of which RM4.7 million will be LCL's 51 percent portion," he said. Kamarulzaman said the importance of United Arab Emirates cannot be discounted as this region would likely continue to underpin the group's growth in the next four to five years. "The group has recently secured a RM110 million contract in Palm Jumeira, Dubai which is its third project in the smallest man-made island in Dubai. "In total, the group has more than RM467 million worth of contracts in UAE, totaling close to 80 percent of its outstanding order book," he said. Going forward, he said, LCL was closed to securing two more additional projects in Palm Jumeira. "The deal is expected to be signed in the medium term. The total value is said to be in the region of RM200-RM250 million," he said. Kamarulzaman said LCL's foray into India was also deemed favourable given the huge potentials. "It is expected to sign a RM100 million IFO contract in the short term. "A rough estimate indicates that the project in India can enhance the group's earnings for 2008 financial year by RM1.9 million," he said. Given the scenario, he said, Malaysia would eventually take a back seat as the company focuses more on overseas contracts due to higher margins and less competition. "The company will still continue to be a major player in Malaysia but will be more selective in terms of projects. "We believe the presence in Malaysia is important, as it will serve as training ground for its skilled workers before sending them out overseas," he said. He said currently, the group has RM100 million worth of order book in Malaysia and expected to maintain it at that level. "The order book can sustain LCL for the next two financial years," he said. The analyst said 80 percent of the group's major works now were in the UAE 17.1 percent in Malaysia and India less than three percent. "However, with the impending job in India and Kazakshtan, Malaysia will fall further and take a back seat on LCL's growth fortune," he said. He said TA Securities has revised upwards LCL's 2008 and 2009 earnings assumptions by 19.2 percent and 9.8 percent respectively taking into consideration the new projects worth RM400 million from Dubai, Kazakhstan and India that would propel the group's revenue and earnings from 2008 onwards. "The fair value for LCL is revised upwards to RM6.30," he said.