We believe Pintaras’ earnings outlook remains positive in the medium term. While the domestic property and construction outlook appears gloomy, the construction demand in Singapore remains healthy. Given the group’s operational efficiency and good track record, we believe it is able to benefit from the improved construction demand in Singapore. The recent coronavirus outbreak may lead to tighter safety regulations, but the impact is minimal at this moment. Maintain BUY.

Earnings Prospects Remain Intact

The recent change in government creates political uncertainty in the country, which we believe will continue to dampen sentiment on the construction sector. The roll-out of new infrastructure projects may be further delayed, while the implementation of some property projects may be disrupted due to the change in the federal and some state governments. That said, we believe Pintaras Jaya’s earnings outlook over the next 2-3 years remains good as most of its earnings are contributed by its Singapore operation.

Healthy Order Book Replenishment

Year-to-date (YTD), Pintaras has secured RM443m of new contracts in FY20. Its order book stood at c. RM446m as at February 2020, equivalent to 0.9x our FY20E revenue. Meanwhile, its tender book remains high at c.RM3bn. We believe Pintaras’ order book replenishment remains intact as we understand that the group has established a good track record in Singapore on the back of its high-quality work and operational efficiency.

Expansion in Singapore

The group has spent close to RM38m in capital expenditure (capex) in FY19 mainly for new machinery in Singapore. Currently, it has at least 50 rigs, most of which are in Singapore. The group may further expand its fleet in Singapore to cater for the increased piling services demand.

Maintain BUY

We make no changes to our FY20-22E core EPS forecasts. We believe its Singapore operation will continue to support the group’s earnings in the medium term. Its net cash position of RM0.34/share and dividend yield of 6.8% is attractive in our view. Maintain our BUY call with an unchanged 12-month TP of RM4.04, based on a FY20E PER of 12x.

Source: Affin Hwang Research - 12 Mar 2020