MITRA’s FY16’s CNP of RM97.3m was within our and consensus expectations, accounting for 97% and 100% of estimates, respectively. A 5.0 sen dividend was declared for FY16, above our 4.0 sen estimate. On a separate announcement, MITRA has entered into a 60:40 JV to acquire lands in Sepang and Nilai for RM181.2m. Maintain FY17E CNP and introduce FY18E CNP of RM99m. Maintain OP with an unchanged SoP derived TP of RM1.49.

FY16 inline. FY16’s CNP of RM97.3m was within our and consensus expectations, accounting for 97% and 100% of estimates, respectively. A 5.0 sen dividend was declared for FY16, above our 4.0 sen estimates. We derive our CNP after stripping off RM17.6m gain on disposal of the forced land sale in Johor.

Land banking JV. On a separate announcement, MITRA has entered into a 60:40 JV with Gema Padu S/B to acquire 333.4 acres of land at (i) Kota Warisan, Sepang (41.7ac) and (ii) Emville, Nilai (291.7ac) for a purchase consideration of RM181.2m (refer overleaf).

Results highlight. FY16 CNP of RM97.3m increased 12% YoY on the back of: (i) higher billings from their construction division (+10%), and (ii) improved property EBIT margins (+13.1ppt) as construction on existing developments progressed into more advanced stages. Meanwhile, 4Q16 CNP of RM25.2m was flat QoQ on the back of flat billings after omitting the forced land sale of RM19.6m.

Company outlook. Currently, MITRA’s outstanding order book stands at RM1.53b providing earnings visibility for another c.1.5 years. For FY17, we had targeted a replenishment of RM800m, below management’s target guidance of RM1.0b. As for their property arm, sales for their ongoing Wangsa 9 residency project remain weak with phase 2 registering only c.45-50% take up since launch in Nov 2014. That said, Wangsa 9’s unbilled sales of RM161m will provide visibility for another 1.5 years. Meanwhile, its South Africa division will see unbilled sales of Rand22m (RM7.0m) recognised progressively upon completion of the transfer of ownership in FY17E.

Maintain FY17E earnings. Post results, we maintain FY17E earnings of RM102m and introduce our FY18E earnings of RM99m.

Maintain OP with unchanged TP of RM1.49. Our TP implies 11.0x FY17E FD PER, which is in line with small-mid cap contractors’ targeted Fwd. PER range of 9-13x.

Risks to our call include lower-than-expected margins, delay in construction works, lower-than-expected order book replenishment and lower-than-expected property sales.

Source: Kenanga Research - 28 Feb 2017