Results

• Mitrajaya reported 1QFY16 results, displaying revenue of RM195.5m (+21% YoY, -23% QoQ) and earnings of RM18.5m (+38% YoY, -27% QoQ).

Deviation

• 1Q earnings made up 19% of our full year estimates (20% of consensus) which we deem to be inline.

• Traditionally, 1Q has been the slowest quarter for Mitrajaya. For example, in FY14 and FY15, 1Q only contributed 20% and 15% to full year earnings.

Dividends

• None declared. Usually in 4Q.

Highlights

• Construction the top performer. The construction division saw revenue and EBIT increase YoY by 27% and 17% respectively. EBIT margin was slightly lower at 9.8% vs 10.7% last year.

• Job wins flowing. YTD job wins amounts to RM450m, almost matching FY15 full year sum of RM469m. Its orderbook currently stands at RM1.6bn, implying a decent cover of 2.1x on FY15 construction revenue.

• Out to grab more. Mitrajaya has submitted RM2.5bn worth of tenders comprising RM1.7bn in building works and RM800m infra based. It is also preparing for another RM2.5bn worth of tenders to be submitted. Management is targeting for another RM1bn in new job wins which would bring the full year sum to RM1.45bn if achieved. Our full year target is more conservative at RM800m.

• Property does surprisingly well. Overall property revenue and EBIT showed a 9% and 47% YoY increase. EBIT margin expanded significantly from 21.9% to 29.5%. This was possibly due to recognition of Wangsa 9 and sale of homes in South Africa (as opposed to raw land sale previously).

Risks

• Slower than expected orderbook replenishment.

Forecasts

• Our forecast is unchanged as the results were inline.

Rating

• Maintain BUY, TP: RM1.88
• Mitrajaya offers decent earnings growth prospects with a 3- year CAGR of 11.2% at an inexpensive FY16-17 P/E of 8.6x and 7.8x respectively.

Valuation

• Our SOP based TP of RM1.88 implies FY16-17 P/E of 12.2x and 11.1x respectively.

Source: Hong Leong Investment Bank Research - 27 May 2016