Pintaras’ 9MFY18 result was below market and our expectations. Net profit plunged 63% yoy to RM12.1m in 9MFY18 due to its low order book replenishment. But net profit jumped 257% qoq to RM6.5m in 3QFY18 due to additional profit from finalisation of accounts for completed projects. We cut EPS by 13-27% in FY18-20E to reflect lower order book replenishment. Maintain our HOLD call with a reduced TP of RM2.85, based on target FY19E PER of 15x. Attractive net yield of 6.8% will support current share price.

Below Expectation

Net profit of RM12.1m (-63% yoy) in 9MFY18 is only 31% of consensus fullyear forecast of RM39.1m and 53% of our previous estimate of RM22.9m. Revenue fell 57% yoy to RM73.8m in 9MFY18 on lower piling (-66% yoy) and manufacturing (-1% yoy) revenue. PBT fell 59% yoy to RM17.1m in 9MFY18, mainly due to lower PBT for both construction (-72% yoy) and manufacturing (-39% yoy) divisions.

Pick Up in New Contract Wins

Pintaras clinched RM150m worth of new contracts in YTD. The largest contract secured was worth RM68.5m to provide piling and substructure works for the Riveria Sentral office and serviced apartments. Pintaras’ remaining order book is RM110m and it has submitted tenders for new projects worth RM1.1bn.

Earnings Cut

Prospects to secure new contracts remains challenging due to the weak property market conditions. We revise down our EPS forecasts by 13-27% in FY18-20E to factor in lower new contract assumptions of RM150m in FY18E, RM200m in FY19E and RM250m in FY20E, slower progress billings. Previously assumed RM250m in each year.

Maintain HOLD

Applying the same target FY19E PER of 15x, we cut our TP to RM2.85 from RM3.16 to reflect the cut in EPS forecasts. We reiterate our HOLD. Pintaras is in a relative better position to weather any construction sector slowdown due to its high net cash of RM157m or RM0.94/share, 32% of its current market capitalisation. Net yield of 6.8% is also attractive.

Source: Affin Hwang Research - 28 May 2018