Pintaras Jaya’s FY19 result was within our expectation. Core net profit tripled yoy to RM39.9m in FY19, mainly due to the earnings contribution from its Singapore operation, which was acquired in September 2019. Given better order book replenishment prospects and expected stable EBIT margin of 16-17%, we raise our FY20-21E core EPS forecasts by 25- 29%, and introduce our FY22 earnings forecast. Maintain BUY with a higher TP of RM4.07 based on FY20E PER of 12x.

Core Net Profit Tripled

Pintaras’s FY19 core net profit tripled yoy to RM39.9m. This is above consensus FY19 forecast of RM36.6m, but within our FY19 estimate of RM39.2m. Revenue tripled yoy to RM315.9m in FY19, boosted by the contribution from Pintary, which made up about 80% of group revenue. EBITDA margin contracted by 3.7ppt yoy to 24.2% partly due to lower utilization in the 6M19 on the back of lower piling services demand in Malaysia. Notably, Pintaras declared an interim DPS of 12 sen, bringing total FY19 DPS of 20 sen (vs. FY18 DPS of 20 sen), which was above our expectation of 15 sen.

Expect EBIT Margin to Remain Stable

Though Pintaras’ 4Q19 revenue drop by 7% qoq to RM90.9m, its core net profit improved by 20% qoq to RM16.1m. This was mainly due to lower amortization of intangible assets of RM0.8m (vs. RM11m in 3Q19), arising from the Pintary acquisition. EBIT margin improved to 18.8% in 4Q19 from 13.7% in 3Q19. We expect EBIT margin to remain stable at around 16-18%, given the group’s improved operating efficiency and competitive advantage in bidding for jobs.

Maintain BUY

We maintain our BUY call on Pintaras, given the attractive FY20E PER of 9x and net yield of 7%. Its balance sheet position remains strong with net cash of RM83m or RM0.50sen/share. Though capex requirement may be higher in FY20E to support increased piling services demand in Singapore, we believe the group can maintain its DPS of 20sen. We lift our TP to RM4.07 from RM3.16 based on 2020E PER of 12x.

Source: Affin Hwang Research - 30 Aug 2019