Results

3QFY14 results came in with revenue of RM146m (+108% YoY, +8% QoQ) and core PATMI of RM13m (+202% YoY, -3% QoQ).

Cumulative 9M PATMI amounted to RM38m, up 137% YoY. After removing RM4m gain on disposal from the Rawang Hospital in 3Q last year, core earnings growth would be even stronger at 223%.

Deviation

• 9M core PATMI made up 78% of our full year forecast , which is slightly above expectations.

Dividends

• None. Final dividend usually declared post 4Q results.

Highlights

Construction leads the way. Construction revenue soared 109% YoY during the 9M period while EBIT margin expanded from 5.1% to 9.9%. Major contributing jobs were the LRT stations, MACC headquarters and Symphony Hills condos.

Strong job wins. Orderbook replenishment stands at RM949m YTD, an all-time high (FY13: RM501m). Its orderbook currently stands at RM1.6bn. This implies a superior cover of 7.2x on FY13 construction revenue, anchoring earnings growth prospects. We were made to understand that another contract (RM200-250m) could be secured by year end.

Wangsa 9 well received. Take up rate for Phase 1 (GDV: RM200m) of Wangsa 9 has hit 64% (80% if bookings included) since its launch last month. Given the encouraging response for Phase 1, Phase 2 (RM200m) will be launched sometime in Dec 14 and Phase 3 (RM250m) in early 2015. We envisage strong take up for Wangsa 9 given (i) strategic location behind Wangsa Walk Mall, (ii) LRT connectivity with the Sri Rampai station 150m away and (iii) close proximity to KL city (7km).

Risks

• Delays in execution and softening property market.

Forecasts

• We raise FY14 earnings by 4.2% to reflect stronger than expected progress billings on its orderbook.
• Our FY15-16 forecasts are unchanged but we highlight potential upside from stronger than expected j ob wins and take up rate for Wangsa 9.

Rating

BUY, TP: RM1.52

• Mitrajaya is an under researched hidden gem which offers superior earnings growth at cheap valuations of 9x and 7.6x FY14-15 P/E and decent yields of 3-4%. It is our top small cap construction pick, with 32% upside potential.

Valuation

• Despite our earnings upgrade for FY14, our TP is unchanged at RM1.52 (based on unchanged 10x FY15 P/E) as our FY15 earnings are maintained.

Source: Hong Leong Investment Bank Research - 27 Nov 2014