• Pintaras’ net profit fell 87% yoy to RM2.1m in 4QFY20 due to lower revenue (- 72% yoy) as its operations were affected by the movement restrictions in Malaysia and Singapore.
• Overall, FY20 net profit of RM31.7m was within our expectation but below market’s. We expect a strong core EPS growth of 30% yoy in FY21E but there are earnings risks due to the weak property market.
• Maintain HOLD call with RM2.33 target price, based on target FY21E PER of 8x.

Within Our Expectation But Below Market’s

Pintaras’ reported FY20 net profit of RM31.7m that was 27% below consensus forecast of RM43.7m but close to our estimate of RM34.2m. Revenue grew 18% yoy to RM373.9m in FY20, driven by higher progress billings as it grew its order book with new contracts secured in Singapore. Pretax profit jumped 24% yoy to RM39.3m, mainly driven by higher revenue and lower fair value loss on financial assets. EBIT margin contracted 2 ppt yoy to 12.1% in FY20 due to higher contribution from its Singapore projects that typically derive lower profit margins. Manufacturing earnings fell 58% yoy to RM1.7m in FY20 due to lower revenue (-21% yoy) as its operations were disrupted by the movement restrictions imposed by the Malaysia (18 March 2020) and Singapore (1 April 2020) governments due to the Covid-19 pandemic in 2HFY20.

Good Prospects to Grow Order Book

We believe its remaining order book of RM400m will shore up revenue in FY21E. Good prospects for Pintaras to expand its order book given its tender book of about RM3.5bn. The resumption of works since early-May in Malaysia and early-June in Singapore will see drive a pick up in revenue in 1QFY20. But the slow resumption of works in Singapore due to high infection rates among foreign workers will probably delay the full utilisation of its rigs to October 2020.

Worst Is Likely Over But Slow Recovery Expected

We expect a strong earnings rebound of 30% to RM48.4m in FY21E, driven by its high remaining order book that expected to be recognised over the next 12 months. But there are earnings forecast risks due to the sluggish property market in Malaysia and high infection rates among foreign workers in Singapore causing work delays. We maintain our earnings forecasts and HOLD call on the stock with RM2.33 target price, based on target FY21E PER of 8x. Key upside/downside risks are higher/lower new contract wins and faster/slower progress billings for ongoing projects.

Source: Affin Hwang Research - 28 Aug 2020