Despite the sluggish construction sector newsflow post-GE14, PESONA bucked the sluggish trend by securing sizeable new jobs amounted to c.RM920m in the past 12 months, bringing the outstanding order book to RM2.0bn as of end March 2019. Following the 33% correction from 52-week high of RM0.365 to RM0.245 yesterday, PESONA provides a positive risk-reward profile at 7.8x FY19E P/E (24% lower against peers) with 4.1% dividend yield, underpinned by a healthy outstanding order book of RM2.0bn (a 3.6x cover on FY18 construction revenue and provided earnings visibility until 2021) and a stable recurring concession income for UNIMAP (until 2035). Technically, the stock is poised to retest RM0.265-0.30 zones following the bullish triangle breakout.

Young but experienced. Pesona Metro Holdings (PESONA) started in 1996 as a subcontractor and PESONA attained the CIDB G7 license in 1999, enabling it to undertake contracts of unlimited value. Since then, the company has grown to become a full fledge contractor with over RM2bn worth of completed jobs encompassing infrastructure and buildings. Its key projects portfolio includes the construction of high-rise luxury residential buildings, commercial buildings for offices and malls, infrastructure works for the construction of highways as well as rehabilitation and beautification of rivers.

PESONA also derives stable income from the acquisition of 70% stake in SEP Resources (M) Sdn Bhd, the eventual concessionaire of the completed UNIMAP hostel. This accorded the Group a concessionaire arm which has a 22.5-year concession to undertake the planning, designing, financing, constructing, equipping, installing, completing, testing and commissioning of the facilities and infrastructure, including the provision of asset management services for student hostels at Universiti Malaysia Perlis (UNIMAP).

Bullish triangle breakout. After plunging 53.4% from 52-week high opf RM0.365 (5 Sep) to a low of RM.017 (12 Dec), PESONA’s share prices have been trending higher along the support trendline before staging a bullish triangle breakout on 12 July. We believe the breakout could kickstart a new rally soon to advance towards RM0.265 (50% FR) and RM0.29 (61.8% FR) before reaching our LT objective at RM0.30 psychological barrier. Key supports are RM0.23 (support trendline) and RM0.225 (lower Bollinger band). Cut loss at RM0.215.

Source: Hong Leong Investment Bank Research - 24 Jul 2019