News

• Wins public apartment contract. Mitrajaya announced that it has been awarded a RM157.3m contract from Putrajaya Holdings to build 800 units of public apartments at Precinct 17, Putrajaya under the “Civil Servants Housing Scheme”. The job is scheduled for completion in Feb 2019 (i.e. in 3 years’ time).

Comments

• First job win this year. This contract represents Mitrajaya’s first job win for the year. Management previously guided that it has tendered for several affordable housing jobs in Putrajaya. Mitrajaya also has a relatively good working track record with Putrajaya Holdings and has to date, secured over RM1bn worth of jobs from the latter.

• Orderbook remains healthy. Including this recent job win coupled with an estimated burn rate of RM240m in 4QFY15, we estimate Mitrajaya’s orderbook to currently stand at RM1.5bn. This translates to a healthy 4x cover ratio on FY14 construction revenue. Despite FY15 being a rather soft year for job wins at RM469m (FY14: RM1.1bn), we reckon that the momentum could pick up this year.

Risks

• Lower than expected orderbook replenishment could slow down its earnings growth potential that has been robust over the last 3 years.

Forecasts

• No changes to our forecast as YTD job wins of RM157.3m are within our full year replenishment target of RM500m.
• 4QFY15 results are due this Thursday (25 Feb).

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 9.4x and 7.8x 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 - 24 Feb 2016