1Q16 CNP of RM18.5m came in broadly within our and consensus estimates at 18% and 20%, respectively, as we expect construction billings to pick up for the remaining quarters in FY16. No dividends declared as expected. We make no changes to earnings forecast. Hence, maintain OUTPERFORM call with an unchanged TP of RM1.77 based on our SoP calculations implying a 11.1x FY16 PER.

Broadly within expectation. 1Q16 CNP of RM18.5m came in broadly within our and consensus forecasts representing 18% and 20% of estimates, respectively. We deem the results as broadly within expectation as we expect the advancement of construction billings to pick up for the remainder of FY16. No dividends were declared as expected.

Result Highlights. 1Q16 CNP of RM18.5m was up 47% YoY buttressed by lower effective tax rate (-3ppt) and an increase in topline by 27% from higher construction activities coupled with property sales and billings, which saw property EBIT increased by 74%. 1Q16 CNP of RM18.5m decreased 27% QoQ underpinned by: (i) 23% dip in revenue mainly due to lower construction billings (-23%) and (ii) lower construction EBIT margins (-4.7ppt) as 4Q15 saw a number of project finalisations which help boosted margins. We note that property earnings were back in the black bolstered by a 103% increase in property revenue attributed to higher sales and billings from their Wangsa 9 project.

Construction prospects. Currently, MITRA’s outstanding orderbook stands at RM1.64b providing earnings visibility for another c.1.5 years. Year-to-date, MITRA has secured RM450m worth of contracts making up 64% of our RM800m orderbook assumption with a remainder of RM350m to be achieved. We feel our replenishment target is achievable given the existing RM2.5b tenderbook in hand. That said, we note that management has a far greater target of another RM1.0b to be achieved till year-end.

Property unbilled sales. Within the property segment, MITRA’s unbilled sales of c.RM195m from Wangsa 9 and 280 Park Homes provide visibility for another 1.5 years. Meanwhile, its South Africa division will see unbilled sales of Rand75m (RM20m) recognised progressively upon completion of the transfer of ownership by year-end.

Maintain earnings. We make no changes to our FY16 and FY17 earnings forecasts of RM105.8m and RM114.4m, respectively.

Valuations unchanged. Maintain OUTPERFORM with an unchanged target price of RM1.77 based on our SoP calculations. Our TP implies 11.1x FY16 PER, which is inline with small-mid cap contractors’ Fwd. PER range of 9-11x. Risks to our call include lower-than-expected margins, delay in construction works, lower-than-expected orderbook replenishment and lower-than-expected property sales.

Source: Kenanga Research - 27 May 2016