The acquisition of Pintary International has improved Pintaras Jaya’s earnings visibility as the prospects for piling services in Singapore remain good. This should mitigate the weaker domestic demand, at least until construction activity picks up. Although we anticipate a lower FY19E DPS of 15 sen, we expect this to normalise to 20 sen in FY20-21E. Despite this, FY19-21E dividend yields are attractive at 6- 8%. Maintain BUY.

Earnings Boost From Pintary International

To recap, Pintaras recorded strong core earnings growth in 9MFY19 mainly contributed by Pintary International (about 70% of total group earnings). Its revenue doubled to RM225m while core net profit improved by 2.4x to RM34m in 9MFY19. We expect its Singapore operations to continue to be the major contributor to group earnings, given higher demand for piling services in the country.

Order Book Replenishment Improved

We estimate that Pintaras secured RM350m in new contracts in FY19, higher than the RM143m won in FY18. Its order book stood at RM230m as at 30 May 2019, which is equivalent to 0.7x of our FY19E revenue. Its tender book has increased to RM4.5bn from RM0.5bn in November 2018, most of which related to projects in Singapore.

Dividends May be Lower

We expect a short-term blip in the DPS as the company may conserve some cash, given its depleting cash level and challenging business operating environment. We expect FY19E DPS to be lower at 15 sen, before reverting 20 sen in FY20-21E when operating cash flow improves.

Maintain BUY

We make no changes to our FY19-21 core EPS forecats. We believe Pintaras is in a relatively better position to weather any construction slowdown given its net cash position. Though we cut our DPS assumptions, we believe the net 2019-21E yields of 6-8% remain attractive. Maintain BUY with an unchanged 12-month TP of RM3.16, based on a FY20E PER of 12x.

Source: Affin Hwang Research - 25 Jul 2019