Results

• Mitrajaya reported 4QFY16 results with revenue coming in at RM252.1m (+0% QoQ, -1% YoY) and core earnings of RM25.2m (-6% QoQ, -1% YoY). This brought full year FY16 earnings to another record year at RM100.2m, increasing +14% YoY.

• Note that the numbers as stated above have been adjusted to remove the impact of a compulsory land acquisition in Johor for the RAPID project. Mitrajaya has received RM19.6m in partial payment (i.e. revenue) and corresponding profits of RM17.6m (i.e. gain on disposal).

Deviation

• FY16 core earnings made up 100% of our full year forecast (104% of consensus) which is within expectations.

Dividends

• Final dividend of 5 sen was declared (unchanged YoY).

Highlights

• Construction continues to perform. The construction division continues to deliver satisfactory performance with FY16 revenue and PBT growing by 10% and 11% YoY. Division EBIT margin experienced a slight YoY expansion from 12.9% to 13.4%.

• A good year for job wins. Mitrajaya managed to secure RM920m in new job wins for FY16 (FY15: RM469m). This brings its orderbook to RM1.5bn, translating to a cover ratio of 1.8x on FY16 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 doing well. After stripping out the compulsory land acquisition, overall property revenue was rather flat YoY at +4% for FY16 but PBT increased by a larger magnitude of +66%. We reckon that the strong YoY jump was due to better margins following the recognition of Wangsa9. PBT for the South African segment grew decently by 9% YoY.

Risks

• Slower than expected orderbook replenishment.

Forecasts

• Our forecast is unchanged as the results were inline.

Rating

Maintain BUY, TP: RM1.95

• Despite its earnings growing at a CAGR of 58% 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 10% given its significantly higher earnings base.

Valuation

• Our unchanged SOP based TP of RM1.95 implies FY17-18 P/E of 12x and 11x respectively

Source: Hong Leong Investment Bank Research - 28 Feb 2017