Yesterday, MITRA announced that they have secured a WCE civil works package worth RM183.4m from WCE Sdn Bhd. Despite YTD wins surpassing our FY16E replenishment target by 15%, we are NEUTRAL on the award as we are currently at the tail-end of FY16 and the award is in line with our FY17E target of RM800m. Hence, we make no changes to our FY16-17E earnings estimates. Reiterate OP with unchanged SoP-derived TP of RM1.49.

News. Yesterday, MITRA announced that they have secured a contract worth RM183.4m from West Coast Expressway Sdn Bhd for the construction and completion of civil works for Section 2 of the West Coast Expressway from South Klang Valley Expressway interchange to Shah Alam Expressway interchange, slated for completion 30 months from the site possession.

Neutral on award. Post award, MITRA’s YTD wins currently stands at RM920m; surpassing our RM800m FY16E targeted replenishment by 15%. Nonetheless, we remain neutral on the award as we are currently at the tail-end of FY16 and the award is in line with our FY17E target of RM800m – bearing in mind that billings from the award is only expected to kick in from FY17. We note that the YTD wins is still in line with management’s FY16E replenishment target of RM1.0b. Assuming PBT margins of 8%, we expect the contract to contribute c.RM4.4m to bottom line per annum.

Company outlook. Currently, MITRA’s outstanding order book stands at RM1.68b, providing earnings visibility for another c.1.5- 2.0 years. Moving forward, we believe our FY17E replenishment order book of RM800m is achievable on the back of c.RM2.0b tender book. However, we note that job margins might be slightly compromised in view of the competitive landscape due to the slowdown in property market.

Earnings estimates. Post award, we make no changes to our FY16-17E earnings estimates.

Maintain OUTPERFORM with unchanged TP of RM1.49 based on SoP. Our TP implies 11.0x FY17 FD PER, which is in line with small-mid cap contractors’ targeted Fwd. PER range of 9-13x.

Risks to our call include (i) lower-than-expected margins, (ii) delay in construction works, (iii) lower-than-expected order book replenishment and (iv) lower-than-expected property sales.

Source: Kenanga Research - 28 Dec 2016