Results

• Mitrajaya reported 3QFY16 results with revenue of RM251m (+2% QoQ, +9% YoY) and earnings of RM27m (-9% QoQ, +4% YoY).
• Cumulative 9MFY16 earnings summed to RM75m, increasing 20% YoY.

Deviation

• 9M earnings made up 76% of our full year forecast which is within expectations. Against consensus, this made up 95% but we note that this is likely due to “stale” estimates that were not updated.

Dividends

• None declared. Usually in 4Q.

Highlights

• No surprises for construction. The construction division continues to deliver satisfactory performance with 9M revenue growing by +12% YoY on back of stable EBIT margins at 13% (9MFY15: 12.9%).
• Decent job wins but more needed. Mitrajaya has managed to secure 4 contracts YTD totalling RM577m. This has already surpassed the full year sum for FY15 at RM469m. Its orderbook of RM1.4bn translates to a 1.8x cover ratio on FY15 construction revenue. In view of Mitrajaya’s much higher revenue base currently, we feel that more job wins may be needed to sustain its earnings growth momentum as witnessed in the past.
• Property fares better. Overall 9M property revenue increased +13% YoY thanks to growth both domestically and in South Africa. During the same period, EBIT margin expanded from 25.3% to 29.4% due to contributions from Wangsa 9. The said development currently has unbilled sales of RM156m. Coupled with RM9m unbilled sales in South Africa, this would overall imply a healthy cover ratio of 1.7x on FY15 property revenue.

Risks

• Slower than expected orderbook replenishment.

Forecasts

• Our forecast is unchanged as the results were inline. Rating Maintain BUY, TP raised to RM1.95
• Despite its earnings growing at a CAGR of 69% over the last 3 years, Mitrajaya continues to deliver commendable results. We continue to envisage growth, albeit at a slower pace now with CAGR of 11% given its significantly higher earnings base.

Valuation

• While there are no changes to our earnings estimate, we raise our SOP based TP from RM1.88 to RM1.95 as we roll over our valuation horizon from FY16 to mid-CY17. This implies FY16-17 P/E of 13.2x and 12x respectively.

Source: Hong Leong Investment Bank Research - 29 Nov 2016