• The Maintenance and Construction divisions contributed almost 80% to PBT: PRTASCO (the biggest private road maintenance player in Malaysia) is an integrated total infrastructure development provider specialising in the following areas: Maintenance (contributed 46% to FY16 PBT), Construction (32%), Engineering consultancy (9%), Property (7%), Education, trading and manufacturing (6%). The group’s forte is providing roadwork maintenance, which generates a steady income stream, as most of its maintenance works are based on concessions awarded by state and federal governments.

• Strong orderbook. As at end-Dec, PRTASCO’s outstanding maintenance orderbook stood at ~RM4bn that could last until 2026. The group is currently tendering for over RM1bn worth of roadworks. For its construction division, PRTASCO’s outstanding orderbook was ~RM700m, which will continue to anchor the segment’s earnings growth over the next two years, backed by a relatively large scale PPA1M project that is delayed by land matters. Moving forward, Protasco aims to beef up its orderbook through tendering for RM4.5bn worth of projects involving both large scale infrastructure and road projects.

• More relief rally from oversold levels. PRTASCO’s share price has been on a downtrend since YTD high of RM1.29 on 13 Jan. Following the disappointing 4Q16 results on 27 Feb, PRTASCO’s share prices gapped down further to a low of RM1.00 (28 Feb) before staging a technical rebound to end at RM1.09 yesterday on heavy volume (4.18m shares; 45% higher against 1M average).

• Overall, we see limited downside risks for PRTASCO in the short term, supported by strong orderbook, undemanding valuations (P/B is 20% lower and DY is 103% higher against its peers), bottoming up readings and expectations that work orders for the delayed and upcoming projects would start to trickle in the subsequent quarters. A decisive breakout above RM1.12 will spur prices higher to refill the RM1.12-1.16 gap and advance further towards RM1.21 (downtrend line) before reaching our LT objective at RM1.29 (76.4% FR).

• On the flip side, key supports are RM1.06 (2, 3 & 6 Mar low) and RM1.03 (daily lower Bollinger band). Cut loss at RM0.995.

Source: Hong Leong Investment Bank Research - 8 Mar 2017