• 2QFY19 core earnings turned a net profit of RM9.2m, from a net loss of RM0.5m in 1QFY19. This also records 3.3 folds on yoy basis.
• 2HFY19 core earnings grew 15.4% yoy and was broadly inline with our estimates at 52.9%. The growth was mainly due to the inclusion of Singapore’s unit for the entire 2QFY19 period.
• Since acquiring the Singapore unit, it has secured RM148m new orderbook bringing current outstanding orderbook to c.RM270m that provides X months of earnings visibility.
• HOLD with RM2.30 TP. Earnings visibility remains limited at the moment as it mainly relies on the Singapore market. Nevertheless, dividend yields at current levels are attractive. Buy on dips.

Uplifted by Singapore segment

2QFY19 core earnings turned a net profit of RM9.2m, from a net loss of RM0.5m in 1QFY19. On yoy basis, core earnings surged by over three folds. This was due to the inclusion of Pintary International’s progress billings for the entire 2QFY19 period. To recap, Pintaras completed the acquisition on 14 Sep 2018 after receiving shareholders’ approval.

2HFY19 broadly inline with our estimate

2HFY19 core earnings grew 15.4% yoy and was broadly inline with our estimates at 52.9%. Still, margins were lower due to higher progress billing mix from the Singapore segment, which counted c.63% of total revenue.

Margin pressures on heavy reliance in Singapore

After the acquisition, it has secured RM148m of new jobs in Singapore which brings total outstanding orderbook to RM270m. However, we expect margins will continue to be under pressure as Singapore jobs generally commands low margins due to the highly competitive nature of the market there. On the other hand, management expects outlook for the domestic market to remain challenging in the view of prudent government spending and sluggish property segment.

Maintain Hold and TP of RM2.30

We maintain our HOLD recommendation and TP of RM2.30. We are cautious on its prospect and margin pressures as it continues to rely on job wins in Singapore. The existing orderbook of RM270m also offers limited visibility, lasting for 1-2 years. Notwithstanding, current share price offers attractive dividend yield of 8.7% based on 20sen DPS per annum assumed. Accumulate on dips.

Source: BIMB Securities Research - 25 Feb 2019