• 3QFY18 earnings fell 23.1% yoy mainly on weaker contribution from the construction segment. As a result, its 9MFY18 earnings were only 51%/ 31% of ours/consensus estimates.

• We pare down FY18-20F earnings forecast by 26-49% on lower orderbook replenishment amidst the challenging market in both property development and infrastructure projects.

• We retain our HOLD call with lower TP of RM2.80 on weaker orderbook replenishment outlook. However, at current price the stock offers decent dividend yield of 6.8%.

Earnings declined attributed by weak construction segment Pintaras’ 9MFY18 earnings only made up 51%/31% of ours/consensus earnings. It fell 63.4% yoy on lower construction contribution. While it secured a new mixed property project worth RM68.5m in the quarter (3QFY18), the earnings impact is minimal.

Challenging outlook for the sector

Management noted that property developers are reluctant to award contracts running up to and post Elections. We believe this situation could prolong as transitioning of the new government has seen more impetus towards rationalising the nation’s debt level and reviewing the relevant approval processes. This would also see the costings of various major infrastructure projects being reviewed or phased out.

Lower earnings

On that note, we lower our FY18-20F earnings by 26%-49%. This is on the back of lower orderbook replenishment assumption to RM100m (from RM250m) for FY19-20F and reinstates FY18 assumption as per the YTD orderbook replenishment of RM115m.

Maintain Hold with revised TP of RM2.80

We reiterate our HOLD call with a lower SOP-derived TP of RM2.80 (from RM3.75). Following the share price weakness, the stock offers an attractive yield of 6.8% based on our 20sen DPS assumption. We believe this is fair given its strong cashpile. The attractive yield, in our view, could also compensate investors for the transient setback faced by the sector.

Source: BIMB Securities Research - 28 May 2018