Period

4Q15/FY15

Actual vs. Expectations

FY15 core net profit (CNP) of RM87.7m came in above expectations making up 112%/111% of our/consensus estimates. The positive variance was due to better-thanexpected construction billings and revenue recognition from its South Africa division.

On a separate announcement, MITRA secured a contract worth RM293m from PJ Midtown Development Sdn Bhd for the mixed development complex building and external works located in Section 13 Petaling Jaya (refer overleaf for details).

Dividends

A single and final-tier dividend of 5.0 sen (4.3% yield) was declared exceeding our expectation of 2.5 sen.

Key Results Highlights

YoY, FY15 CNP rose 63% to RM87.7m underpinned by higher construction billings (+107%) and increased property sales in South Africa from new launches (+75%). That said, the improvement in earnings was well supported by the: (i) improvement in construction EBIT margin (+3.1ppt), and (ii) higher EBIT margin from South Africa division (+6.7ppt).

QoQ, 4Q15 CNP was down 2% to RM25.4m despite the 10% increase in revenue mainly attributable to higher effective tax (+97%) and its property division which suffered a RM8.3m loss (-1410%) due to higher operating expense and slowdown in sales for its completed projects.

Outlook

YTD, MITRA’s orderbook stands at RM1.81b which will provide visibility for the next 1.5-2 years. We reaffirm our positive view on the group’s construction division that it should be able to sustain at least for the next three years, driven by government’s spending on infrastructure projects under 11MP.

We foresee earnings contribution from their South Africa investments to grow steadily in the near future underpinned by more property launches along with a robust take up rate. To recap, MITRA has acquired 215 acres of land in Oct-15 with a proposed GDV of RM485m, which could sustain earnings for the next 3-4 years.

Forecasts

We increase FY16E earnings by 8% to RM105.8m after: (i) increasing FY16 target orderbook to 800m (previously RM700m), and (ii) higher recognition from South Africa division. We also introduce our FY17E earnings of RM114. 4m

Rating

Maintain OUTPERFORM

Valuation

Maintain OUTPERFORM with a higher Target Price of RM1.77 based on our SoP calculations after incorporating changes in FY16 earnings. Our TP implies 11.1x FY16 PER, which is inline with small-mid cap contractors’ Fwd- PER range of 9-13x. Currently it is trading at FY16E PER 7.2x against peers average of 10.5x.

Risks to Our Call

Lower-than-expected margins

Delay in construction works

Lower-than-expected orderbook replenishment

Lower-than-expected property sales

Source: Kenanga Research - 26 Feb 2016