Mitra’s 1HFY19 core loss of RM19m (against core profit of RM18.1m in 1HFY18) was way below both ours and consensus expectations mainly due to lower revenue contribution from both construction and property segment. YTD bottom-line turned red due to lower contribution from construction division but partially offset by property segment. We reckon that Mitra may not be a key beneficiary of revived infrastructure jobs due to its focus on private sector building jobs. We cease coverage on Mitra due to reallocation of our internal resources on our coverage. Our previous forecast, SELL recommendation and TP of RM0.23 (pegged to 7x FY19 P/E) should no longer be used as a reference going forward.

Below expectations. Mitra reported 2QFY19 results with revenue of RM145.4m (- 22% QoQ, -28% YoY) and core loss of RM14.5m. This brings 1HFY19 core loss to RM18.8m against core profit recorded in 1HFY18, which is way below expectations.

Deviations. The lower than expected performance was mainly due to lower revenue contribution from both construction and property segment.

QoQ. Core loss widened to RM14.5m due to lower revenue contribution from all segment.

YoY/ YTD. Bottom-line turned red against core profit both YoY and YTD is mainly due to lower contribution from construction segment, partially offset by stronger performance from property segment.

Outlook. Mitra is less involved with public infrastructure jobs relative to private sector jobs in the past and is expected to continue to focus on the latter’s building jobs going forward. As a result, we reckon that Mitra may not be a key beneficiary of revived infrastructure jobs. Moreover, persistent weakness of property market caused by oversupply issue further dampens the prospect in private sector building jobs in which Mitra is focusing on.

Cease coverage. We cease coverage on Mitra due to reallocation of our internal resources on our coverage. Our previous forecast, SELL recommendation and TP of RM0.23 (pegged to 7x FY19 P/E) should no longer be used as a reference going forward.

Source: Hong Leong Investment Bank Research - 30 Aug 2019