We are excited about Pintaras’ latest contract win which is the third and by far the largest new contract win in FY16. Reiterate BUY with a higher MYR4.08 TP (12% upside). We lower FY16F earnings by 14.4% but lift FY17/FY18 projections by 3.3%/2.4% as recently-secured contracts may contribute more in FY17. The company is well-positioned to capitalise on the strong prospects for the piling segment.
Third contract win in FY16 (Jun). Last Friday, Pintaras Jaya’s (Pintaras) wholly-owned subsidiary, Pintaras Geotechnics SB, received a Letter of Award from Central Plaza I-City Real Estate SB to undertake piling and basement structural works for a proposed shopping complex at Section 7, Shah Alam, Selangor. The contract is valued at MYR72.8mand will commence immediately with a completion period of 13 months. We are excited about the latest contract win as it is by far the largest project won this year after a quiet start to FY16. YTD new contract wins stand at MYR121.8m (RHB FY16 estimate: MYR250m). The prospects for the piling segment remain strong, backed by various mega infrastructure projects like mass rapid transit 2 (MRT2) and l ight railtransit 3 (LRT3) as well as a structural shift towards high-rise developments.
Forecast revision. We expect more contract wins by Pintaras going forward although recently-secured contracts would have limited contribution in FY16. Therefore, we cut FY16 earnings estimate by 14.4% but revise up FY17/FY18 profit forecasts by 3.3%/2.4%.
Risks. These include: i) its ability to replenish its orderbook, and ii) lower profit margins from stiff competition.
Reiterate BUY. Pintaras’ key strengths are its: i) full range of piling machines, tools and accessories, ii) ability to improvise piling solutions to suit diverse ground conditions given its more than two decades of experience in the local piling sector, and iii) ability to secure cash discounts for key inputs, given its strong balance sheet. We value the company at MYR4.08 (from MYR3.96), derived from 10x FY16 P/E (low end of the target P/E range of 10-18x for the construction sector) plus net cash per share as at 30 Sep 2015. Maintain BUY. This report marks the official transfer of coverage to Ng Sem Guan.
Source: RHB Research - 18 Jan 2016
PTARAS (9598) - Pintaras Jaya - Contract Wins Picking Up Steam
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