Pintaras saw a slow start in 1QFY18 due to slow replenishment of its piling order book and new contracts secured are still at a preliminary stage. Net profit declined 72% yoy to RM3.8m due to lower level of activities. But there some pick up in activities on a qoq basis (+15%). We maintain our EPS forecasts on expectation of better results in 2HFY18. Good prospects to win new contracts given strong piling services demand. Net yield of 5.2% is attractive. Maintain BUY with unchanged TP of RM4.62, based on FY18E PER of 15x.

Within Expectation

Pintaras’ 1QFY18 result was was broadly in line with expectation. Net profit of RM3.8m comprise only 8% of our FY18E net profit of RM44.7m. Revenue declined 12% qoq and 72% yoy to RM19.2m due to slow order book replenishment and new contracts secured are still at a preliminary stage of implementation. The lower lower revenue led to EBITDA falling 76% yoy to RM4.2m. But the absence of further project cost incurred for completed projects in 4QFY17 led to a 16% qoq increase in EBITDA in 1QFY18. EBITDA margin improved to 21.9% in 1QFY18 compared to 16.8% in 4QFY17. Net exceptional gain of RM2.1m lifted net profit by 15% qoq despite recurring depreciation expense of RM3.5m in 1QFY18.

Pick Up in New Contract Wins

Current order book is RM80m, which will complete by end-FY18. Pintaras secured 4 contracts totaling about RM75m in 2HFY17. It is targeting RM300m new contracts in FY18 to ramp up utilisation of its piling machines. Demand for piling services are good with the rising infrastructure and affordable housing developments. But Pintaras remains cautious in bidding in order to preserve its profit margin.

Maintain Earnings Forecast With Unchanged TP of RM4.62

We are optimistic that Pintaras will be able to secure more new contracts from its current high tender book of over 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 weightedaverage peer CY18E PER of 15x). FY18E net yield of 5.2% is attractive.

Source: Affin Hwang Research - 27 Nov 2017