• Pintaras’ core net profit fell 24% yoy to RM22.6m in 6MFY21. But core net profit jumped 102% qoq to RM15.1m in 2QFY21 since activities ramped up after the Covid-19 pandemic lockdown was lifted in the previous quarter
   
• The results were within expectations. We expect better results in 2HFY21 driven by the acceleration of work progress for its Singapore projects, which comprise the bulk of its remaining order book of about RM400m
   
• We lift our core EPS by 2% in FY21E to reflect a lower effective tax rate. We reiterate our BUY call with a slightly higher target price of RM3.10, based on a target CY21E PER of 10x

Boosted by Investment Gain

Pintaras’ core net profit of RM22.6m (-24% yoy) in 6MFY21 comprises 48-50% of consensus and our previous full-year forecasts of RM45.7-46.9m. Revenue fell 9% yoy to RM48.4m in 6MFY21 on lower piling revenue (-26% yoy) while manufacturing revenue was stable. But revenue jumped 44% qoq to RM101m in 2QFY21 as piling activities ramped up following the lifting of lockdown in the previous quarter. Investment gains of RM13m boosted its net profit to RM34.1m (-23% yoy) in 6MFY21. PBT margin eased 0.7ppt yoy to 14.7% for its piling division but increased 5.1ppt yoy to 12.6% for its manufacturing division in 6MFY21.

Reasonable Contract Wins to Date

Pintaras clinched 5 new piling contracts in Singapore worth RM163m for 6MFY21 (Fig 2). Its high remaining order book of about RM400m will support earnings growth in FY21-23E. Pintaras submitted tenders for projects worth about RM2.3bn, capitalising on the strong demand for piling services in Singapore from both the public and private sectors. Prospects in Malaysia remain challenging due to the delayed roll-out of infrastructure projects and the weak property market.

Earnings Momentum to Accelerate

We believe Pintaras’ high new contract wins in Singapore last year and sustained strong demand for piling services will drive strong earnings growth over the next 3 years. FY21E PER of 10x is attractive, considering its strong 3-year core EPS CAGR of 16%. Net yield of 5.5-7.0% in FY21-23E is attractive. We believe its high net cash of RM80m or RM0.48/share will support dividend a payout ratio of 26-33% in FY21- 23E. Maintain our BUY call with a higher TP of RM3.10 (+1%), based on CY21E PER of 10x. Key downside risks are slow progress billings and weak new contract wins.

Source: Affin Hwang Research - 22 Feb 2021