• Pintaras’ results disappointed as 2QFY18 earnings declined 84% yoy and 52% qoq on lack of construction works and margins for manufacturing coming under pressure.

• As such, 1HFY18 earnings fell 77% yoy on depleted order book and were only 11%/13% of ours/consensus estimates.

• We lower FY18 earnings forecasts by 40% on slow orderbook replenishment rate and pare down FY19 by 21% on lower spill over from FY18 job secured and margin pressure.

• We expect more job wins in coming quarters albeit amidst a stiff competition backdrop in view of the completion of job packages awarded for LRT3 and MRT2.

• Maintain HOLD with a lower TP of RM3.70 (from RM3.80). Its strong cash pile (RM0.99/share) allows Pintaras to compensate investors with dividends; attractive yields at current levels.

A disappointing result

2QFY18 earnings slumped 85% yoy and 52% qoq to RM1.8m due to lack of construction works while manufacturing margins remained under pressure. This led to 1HFY18 earnings declining 77% yoy to RM5.6m (1HFY17: RM24.5m) and was only 11% of our estimates and 13% of consensus’.

Revised earning FY18 & FY19

Pintaras has secured RM115m worth of jobs in FY18 so far which trails our RM250m assumption. As such, downgrade our forecasts by 40% and assume a lower orderbook replenishment of RM180m. This also leads to lower earnings spill over into FY19 which led us to pare down FY19 estimates by 21%. We also expect margins for new jobs secured to be under pressure amidst stiff competition.

Optimistic job prospects specializing in piling segment

Management expects job wins would improve with the mix skewed towards infrastructure project instead of property. With most of LRT3 and MRT2 job packages has been awarded and more major projects i.e. HSR and MRT3 are undergoing tendering process, we expect this would translate to more piling and construction works.

Maintain HOLD with lower TP of RM3.70

Maintain HOLD with a lower SOP-derived TP of RM3.70. Our TP implies FY19F PE of 15.6x before easing to 14.5x in FY20F. We believe its strong cash pile of RM0.99/share would allow Pintaras to compensate shareholders with dividends in the interim.

Source: BIMB Securities Research - 26 Feb 2018