Pintaras doubled its core net profit yoy to RM33.6m in FY17, recovering from a low FY16 base. This was attributable to more piling works in FY17 compared to the previous year. However, its core earnings missed consensus and our FY17 estimates of RM36.0-38.6m by 7-13%. We make no changes to our eanings forecasts as we remain optimistic that management will secure more new contracts, given its high current tender book of RM1.2bn. Maintain BUY with unchanged TP of RM4.62, based on FY18E PER of 15x.

Low Projects Replenishment Rate

Revenue dropped 59% qoq to RM21.7m in 4Q17 due to lower revenue contribution from its piling (-68% qoq) and manufacturing (-12% qoq) business segments. Net profit dropped 61% qoq to RM3.3m in 4QFY17 due to insufficient construction activities during the quarter. Pintaras experienced a pre-tax loss of RM2.1m for its piling division for the quarter as revenue generated was insufficient to cover fixed overhead and depreciation charges. However, it was partially cushioned by manufacturing pre-tax profit of RM1.7m (+15% qoq).

Core Net Profit Doubled Yoy

For FY17, Pintaras doubled its core net profit yoy to RM33.6m from a low base of RM16.8m in FY16. However, core net profit missed consensus and our core net profit estimates by 7-13% (RM36.0-38.6m) in FY17. Pintaras rebounded from a low base to achieve revenue of RM193.7m (+42% yoy) with pre-tax profit of RM42.4m (+84% yoy) in FY17. This was spurred by more piling works in FY17 compared to FY16, higher investment income and lower material costs for its manufacturing business.

Maintain Earnings Forecast With Unchanged TP of RM4.62

We maintain our earnings forecasts at this juncture despite the slow replenishment of its order book, which stands at RM50m as at 31 Aug 2017. We are optimistic that the management will be able to secure more new contracts from its current high tender book of RM1.2bn, which includes works for LRT Line 3 and Bandar Malaysia projects. Property developers are focusing on high-density mixed development projects, which require more piling works. Hence, Pintaras will benefit from higher demand for bore piling services. Maintain BUY with a TP of RM4.62 (based on weighted-average peer CY18E PER of 15x). FY18E net yield of 4.9% is attractive. DPS of 20 sen was declared in FY17 (FY16: 20 sen).

Source: Affin Hwang Research - 30 Aug 2017