Prospects

• Mitrajaya’s outlook remains challenging, filled with uncertainties over its depleting construction orderbook. Already, the group’s orderbook replenishment in 2018, at RM203.0 mln, is the weakest level since 2010, while 8M2019 construction contract wins that only amounted to RM90.0 mln, brings its unbilled orderbook to RM815.8 mln to sustain the construction segment revenue over the next 1-2 years.

• In the meantime, we reckon that both its property development (local and overseas) projects to remain unexciting in view of the sluggish sales, coupled with the absence of new launches over the near term. Moving forward, the unbilled sales and unsold stocks with a combined value of RM94.1 mln will see mild contribution to its topline over the next two years. In view of the challenging operating environment that is expected to prolong, we are ceasing our coverage on Mitrajaya. Our last recommendation was a SELL.

• We expect Mitrajaya to remain in the red for the remainder of the year with net losses at RM45.9 mln for 2019, before the net losses is trimmed to RM38.5 mln in 2020 as the group will be beset with high finance cost resulting from delays in payment collection in the construction segment over the next two years. Therefore, we do not discount for the possibility of a cash call over the foreseeable future.

• Our last assigned target price was RM0.25, derived from a sum-of-parts valuation as we ascribed a target PER of 8.0x (unchanged) to its fully diluted 2020 construction earnings, while its local and overseas property development units are valued at 0.4x of their respective book values

Source: Mplus Research - 10 Sept 2019