Yesterday, MITRA announced that they have secured a RM160.1m residential building contract for a higher learning institution in Kuala Lumpur. We are NEUTRAL on the award given that MITRA’s YTD wins of RM434m is still within our FY17E replenishment target of RM800m. Maintain our FY17-18E earnings forecasts. Reiterate our OP call with an unchanged SoP-derived TP of RM1.49.

Residential Building Job. Yesterday, MITRA announced that they have secured a RM160.1m residential building job for a higher learning institution located in Kuala Lumpur slated for completion by May 2019 (c.24 months duration).

Neutral on the award. We are NEUTRAL on the award given that MITRA’s YTD wins of RM434m is still within our FY17E replenishment target of RM800m; making up 54% of our replenishment target with a remainder of RM366m to be achieved for the rest of year. Assuming PBT margins of 11%, this newly secured project is expected to contribute c.RM6.6m to MITRA’s bottom-line per annum.

Company outlook. Post award, MITRA’s outstanding order-book stands at c.RM1.9b, providing earnings visibility for another c.1.5- 2.0 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 remains slow with phase 2 registering only c.45-50% takeup 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 - 12 May 2017