News

• Smallish infra works contract. Mitrajaya has been awarded a RM52.2m job involving infra works at the Pahang Technology Park in Gambang.

• Scope of works. The scope of works involves anterial roads, drainage, sewerage, water supply system, electrical, telecommunication and landscaping which will be scheduled for completion by April 2017 (circa 1.5 years from now).

Comments

• Orderbook cover remains very healthy. With this recent smallish job win, we estimate Mitrajaya’s orderbook to stand at RM1.8bn. This implies a very healthy orderbook cover ratio of 4.9x, way above its peers average of 2.7x.

• Job wins moderating this year but.. . Following a strong showing in new job wins for the past 3 years (RM430- 1,136m), we sense a moderation taking place this year with YTD numbers at RM283m. This forms 57% of our full year orderbook replenishment target of RM500m.

• …still eyeing for more. During our previous meet up with management, it shared that it is bidding for building works in the Klang Valley (RM1.5bn) and Putrajaya (RM780m) as well as infra jobs in the Klang Valley (RM200m). It is also preparing another RM300m worth of tenders. Overall, management remained upbeat to further add on to its orderbook by year end.

Risks

• Execution risk on its construction jobs and slow sales for its property developments.

Forecasts

• Our forecast is unchanged as YTD job wins are still within our orderbook replenishment assumption for FY15.

Rating

• Maintain BUY, TP: RM1.95
• Mitrajaya remains our top pick amongst the small cap contractors as it offers a compelling case of robust growth prospects (3 year CAGR: 24%) at inexpensive valuations of 9.1x and 7.6x FY15-16 P/E

Valuation

• Our SOP based TP of RM1.95 implies FY15-16 P/E of 15.6x and 13x respectively.

Source: Hong Leong Investment Bank Research - 12 Oct 2015