News

• Secures Putrajaya condo job. Mitrajaya has been appointed as the main contractor by SP Setia for a condo project in Precinct 15, Putrajaya for RM132.5m. The job scope involves building 363 units of condominium of 35 storeys with amenities and a 5-level car park over a construction period of from Aug 2018 to Feb 2021 (30 months).

Comments

• On track to meet its target. With this recent contract in the bag, Mitrajaya’s YTD job wins now stand at RM944m. Mitrajaya’s orderbook stood at RM1.4bn as of end 2QFY17. After factoring RM510m in new job wins since then (comprising 3 contracts), coupled with an assumed burn rate of RM250m inn 3Q, we estimate its orderbook to currently stand at RM1.7bn. This translates to a cover of 2x on FY16 construction revenue.
• More to come? Mitrajaya’s YTD job wins of RM944m are on track to meet management’s full year target of RM1bn. This could potentially be surpassed if another building job that it is pursuing (RM200-250m) comes to fruition before the year ends.

Risks

• EPS dilution resulting from the impending 1 for 5 rights issue.

Forecasts

• While YTD job wins of RM944m has surpassed our full year target of RM800m, we are taking a conservative stance and keep our forecast unchanged. This stems from the potent ial continued earnings drag in 2H17 from its RAPID projects due to cost overruns.

Rating

• Maintain HOLD, TP: RM0.96 (TERP)
• We see minimal upside catalysts in the near term due to (i) potential continued drag in earnings for 2H17 from its RAPID projects and (ii) EPS dilution from the rights issue in FY18.

Valuation

• Our theoretical ex rights TP is maintained at RM0.96 which is based on 10x FY18 earnings and has imputed the dilution impact from the impending rights issue.

Source: Hong Leong Investment Bank Research - 20 Oct 2017