· Share prices climbed 80% since our last recommendation. So far, MITRA’s stock price has appreciated by 80% since our previous TRADING BUY piece on 5th June 2014 titled “On Track To Deliver High Double-Digit Profit Growth”. In fact, so far, MITRA is the best performer in the construction space in 2015, gaining 63% YTD as compared to that of KL Construction Index’s 1.7% gain. We believe the stock has started gaining investors’ recognition after: (i) the group delivered higher-than-expected earnings (FY14 surpassed our forecast by 38%), and (ii) it achieved higher-than-expected job flows (FY14: RM949.1m vs RM500m forecast).

· Orderbook at all-time high of RM1.9b. MITRA’s orderbook currently is at its alltime high, standing at RM1.9b vis-à-vis its historical average of RM300-500m. The orderbook will last another 3 years. To recap, in 2014, the group secured RM949.1m worth of new orders and so far in 2015, MITRA has replenished another RM416.7m worth of contracts. These new orders came in above our earlier expectations of RM500-300m in FY14-15.

· Aiming to secure RM1.0b new jobs in FY15. As for the rest of FY15, management is expecting to secure another RM600m new jobs making up a total of RM1.0b target for FY15. We would not be surprised if the group could achieve the target judging from the group’s momentum of jobs replenishment i.e. in less than two months, they have already secured RM416.7m.

· Wangsa 9 Phase 1 achieved take-up rates of 69%. As expected, Wangsa 9 Phase 1 (GDV: RM185m), which was launched in July 2014 has achieved strong take-up rates of 69%. (Refer overleaf)

· RM1.5b Puchong Prima mixed development the next catalyst? Note that MITRA has another piece of land (15 acres) in Puchong Prima. (Refer overleaf)

· Entering into a new and higher earnings base. FY14 net profit of RM53.7m (+83.3% YoY) came in way above our expectations, at 138% of our full-year forecasts, driven by strong orderbook, property sales and strong margins. Moving forward, in FY15 MITRA is expected to enter a new and even higher earnings base contributed by stronger orderbook and property sales. We expect the group to approach the RM1.0b revenue mark in FY15 and organically grow from there. All in, we expect the group’s earnings to grow at a superb 3-year CAGR of 37% between FY14-16E.

· Revising higher earnings forecasts. As we had previously underestimated the group’s orderbook recognition rate, construction margins and property segment contribution, we revised higher by 31%-71% our FY14-15E earnings. Our forecasts is based on the: (i) assumption of orderbook recognition rate of 33%- 43% % in FY14-15E, (ii) FY15 orderbook replenishment assumption of RM700m (30% lower than management’s target), (iii) construction margins assumption of 9.5% in FY15 (slightly lower than 9M14’s 9.9%), (iv) unbilled property sales of RM212.8m, and (v) new property sales of RM30m driven by Wangsa 9 Phase 2.

· Maintain TRADING BUY with higher FV of RM1.94. We reckon that this under-researched stock is one of the small-cap stocks that have strong earnings growth visibility coupled with compelling prospects. Despite the share price strong gain, we believe Mitrajaya is still relatively “cheap”, trading at FY15 PER of 7.7x against its small-cap peers’ fwd-PER range of 8.0x-10.0x. Postearnings upgrade, we raise our Fair Value to RM1.94 from RM1.13 previously. We value MITRA based on unchanged ascribed FY15 PER of 9.0x. Therefore, Maintain TRADING BUY, as the stock still offers another 17.6% potential upside.

Source: Kenanga