We are adding 25,000 Mitrajaya (MITRA) @ RM0.75 per share to our Dividend Yield Portfolio. We believe MITRA’s earnings have reached an inflection point after its core net profit (netting off the RM4.2m land disposal gain in Rawang) grew significantly by 40% to RM25.1m in FY13, driven by its construction and property divisions. On top of its strong order book of RM1.2b (3.3x to FY13 revenue), the group also tender another RM1.75bof work, of which management has a strong confidence to secure at least RM300m this year.

Meanwhile, MITRA also targeting to launch a property project in Wangsa Maju this year, which comprise of 3-blocks of luxury condominiums with an estimated GDV of RM650m. We believe this project will achieve strong take-up rates due to its strategic location (next to Sri Rampai LRT station and Wangsa Walk Mall).

All in all, we forecast the group’s net profit to grow by 52% and 31% in FY14 and FY15 to RM38.3m and RM49.9m, respectively. The group's earnings growth is based on the following assumptions: (i) orderbook burn rate of 33%-35%, (ii) new contracts assumption of RM300m per annum, (iii) unbilled sales of around RM80m coupled with expected new sales of RM50m-RM115m in FY14-FY15.

We believe MITRA is one of the jewels in the construction and civil engineering sector. We have a fair value of RM1.13 for MITRA, based on a targeted 9x fwd-PER on FY15 earnings. TRADING BUY.

MITRA has been trading on a nice uptrend following a decisive breakout from the “Symmetrical Triangle” chart pattern. Short term trend of MITRA remained bullish as it stays above all the short, mid and long term moving averages. Despite the sharp rise in share prices over the past few months, the technical picture has yet to show signs that momentum is waning. Therefore, we suspect that MITRA could extend its rally to close up the gap at RM0.87 fairly soon. Should this resistance be taken out as well, MITRA should move higher to retest the next price target at RM1.00.

Source: Kenanga