Pintaras Jaya’s 1HFY19 result was below street and our expectations. Headline new profit fell 11% yoy to RM5m in 1HFY19, mainly due to exceptional loss of RM5.6m. Core net profit jumped 96% yoy to RM10.4m in 1HFY19. We expect better 2HFY19 performance to meet our RM30.8m full-year forecast. High earnings contribution from its newly-acquired Singapore-based subsidiary Pintary International boosted group earnings. High construction order book of RM270m the strong earnings rebound in FY19E. We reiterate our HOLD call with RM2.41 target price, based on FY19E PER of 13x.

Below Expectations

Net profit of RM5m in 1HFY19 comprise only 26% of full-year consensus forecast of RM19.1m and 16% of our previous estimate of RM30.8m. We were surprised by the RM9.4m fair value loss on financial assets. Revenue nearly tripled to RM126.8m with maiden revenue from Pintary, which contributed 70% of group revenue. EBIT jumped 238% yoy to RM13.9m in 1HFY19. But net exceptional loss of RM5.6m led to an 11% yoy decline in net profit to RM5m.

Growing Order Book

The acquisition of Pintary expanded the group’s order book to RM270m, equivalent to 2.8x FY18 revenue. The acquisition has improved earnings visibility for the group as the prospects Singapore piling market prospects remain good. However, the domestic market remains challenging due to the stiff competition and fewer project roll out.

Maintain HOLD

We expect better 2HFY19 result as progress billings accelerate for its remaining order book of RM270m. We fine-tune our core EPS forecasts but cut our FY19E net profit forecast by 18% to RM25.4m to reflect the exceptional losses recognised in 1HFY19. Maintain HOLD.

Source: Affin Hwang Research - 25 Feb 2019