Earnings Rebounded, Margins Improved

Pintaras achieved net profit of RM33m (9M17), 92-94% of consensus and our FY17E estimates of RM35-36m. The result was above our expectation due to higher-than-expected EBIT margin, which improved to 20.8% (+8.3ppts). We expect weaker 4Q17 earnings than the first 3 quarters. We maintain our revenue forecast but raise our EPS forecast by 16% to 25 sen. Maintain BUY with a TP of RM4.62 (weighted average peer target CY18E PER of 15x) and attractive net yield of 5.2%. DPS of 8 sen was declared in 3Q17.

Significant Improvement for Piling Division

For 3Q17, Pintaras revenue increased 82% yoy to RM52.6m but dropped 12% qoq (2Q17: RM59.8m) due to a depleting orderbook of about RM50m, mainly works for the I-City and Quantum Quest Office in Tun Razak. Revenue rebounded strongly to RM172.1m (+79% yoy) from a low base due to higher volume of construction works in FY17 compared to FY16.

Improvement in Margins

EBIT leaped 198% yoy to RM35.9m in 9M17 with EBIT margin improving 8.3ppts to 20.8% (9M16:12.6%), climbing back to its normalized average EBIT margin of 23.4% (FY09-FY16). This was mainly contributed by improved EBIT margin for piling division to 20.5% (+10.5 ppts) and manufacturing to 16.6% (+2.6 ppts). Despite manufacturing EBIT improving, revenue shrank 8.9% yoy to RM23.3m due to lower sales volume and selling prices for its metal container products. But earnings was partially cushioned by lower material costs.

Maintain Our Revenue Forecast But Tweak Our Margins Higher

For 9M17, Pintaras achieved a net profit of RM33m, 92-94% of consensus and our FY17E estimates of RM35-36m. We expect weaker 4Q17 earnings than the first 3 quarters as they have not been securing any contracts since our last meeting with them in April 2017. We maintain our revenue forecasts at this juncture because we view that even if Pintaras can secure a contract within a month, it will only contribute to earnings in FY18 (June year-end). However, we revise up our piling margins assumption by 4 ppt to better reflect its remaining contracts contribution, which led us to raise our EPS by 16% to 25 sen (Previous EPS: 21.5sen) in FY17E.

Source: Affin Hwang Research - 29 May 2029