Last Friday, MITRA announced that they have secured a RM273.8m building contract dubbed ?A Centre of Excellence? from STF Resources S/B. We are NEUTRAL on the award given that it is within our FY17E replenishment target of RM800m. Maintain FY17-18E earnings forecasts. Reiterate our OP call with an unchanged SoP-derived TP of RM1.49.

News. Last Friday, MITRA announced that they have secured a RM273.8m building job known as ?A Centre of Excellence? from STF Resources S/B. The building job is located at Lot 44, Jalan Dato? Onn, Mukim Bandar Kuala Lumpur, Seksyen 51, WP Kuala Lumpur and is slated for completion by April 2019 (24 months from now).

NEURAL on the award. We are neutral on MITRA?s first win of the year as it is well within our FY17E replenishment target of RM800m ? making up 34% of our target with a remainder of RM527m to be achieved. Assuming PBT margins of 11%, we expect this building job to contribute c.RM11.3m to MITRA?s bottom-line for the next two years.

Company outlook. Currently, MITRA?s outstanding order-book stands at c.RM1.8b, 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. For their property arm, sales for their ongoing Wangsa 9 residency project remain sluggish with phase 2 registering only c.45-50% take-up since launch in Nov 2014. That said, Wangsa 9 unbilled sales of c.RM150m 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 FY17.

Maintain FY17-18E earnings. Post award, we maintain our FY17-18E earnings of RM102m and RM99m, respectively.

Reiterate OP with unchanged TP of RM1.49. Our SoP-derived TP implies 11.0x FY17E FD PER, which we believe is fair given that is in line with small-mid cap contractors? targeted Fwd. PER range of 9-13x. We note that MITRA?s FY17-18E margin of c.10% is the same as our average peers? margins (KERJAYA, KIMLUN, HSL).

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 - 17 Apr 2017