MITRA announced that they have secured two news building projects with value amounting to RM377.5m. NEUTRAL on the awards as YTD total win of RM787m is still within our targeted replenishment of RM800m. Maintain our FY17-18E earnings. Post awards, we maintain our SoPderived TP of RM1.20 but upgrade our rating to MP (from UP) given that its share price has plunged over 17% since the announcement of their poor results and we believe that further downside risk is limited.

News. Yesterday, MITRA announced they have secured two news projects with a cumulative value of RM377.5m. The first project worth RM333.5m is for the construction of an academic building and car park for a higher learning institution in KL slated for completion by September 2019. The second project worth RM43.9m awarded by Gema Padu S/B is for the construction of 1 block of ‘Rumah Selangorku’ comprising of 338 units slated for completion by August 2020.

NEUTRAL on the awards. We are NEUTRAL on the awards as their newly secured contracts coupled with existing YTD wins amounts to RM787m - which is still within our targeted replenishment of RM800m; accounting for 98% of our full-year target. We note that our replenishment target of RM800m is slightly more conservative against management’s target guidance of RM1.0b given the slower property market where MITRA has a strong track record in high rise residential projects. That said, should MITRA secure more than our replenishment target, note that we are almost at the tail-end of FY17 and these contracts would be within our FY18E replenishment target of RM1.0b. Assuming PBT margins of 8%, the newly secured contracts are expected to contribute c.RM11.8m/annum to MITRA’s bottom-line.

Outlook. Currently, MITRA’s outstanding order-book stands at c.RM1.80b, providing earnings visibility for another c.2.0 years. Current steel prices are at a 5-year high of RM2655/t (+37% against FY16’s average of RM1933/t) which would lead to some margin compression for on-going projects secured back in FY16. That said, we highlight that we had factored these margins compression into our FY17-FY18E earnings. For their property arm, unbilled sales stood at RM233m (mostly from Wangsa 9 residency and Puchong Prima affordable homes) which is expected to provide c.2.0 year visibility to the group. We note that management plans to launch their Wangsa 9 Phase 3 by Nov 2017 (GDV of RM300m). Meanwhile, its South African division will see unbilled sales of Rand45m (RM14.8m) recognised progressively upon completion of the transfer of ownership in FY17 and early FY18.

Maintaining FY17-18E earnings. We make no changes to our FY17- 18E earnings.

Upgrade to MP with unchanged TP of RM1.20. Recall that just last week (29/8/17) we had downgraded MITRA to UP due to their weakerthan-expected results from losses at their RAPID project. Post awards, we maintain our SoP-derived TP of RM1.20 but upgrade MITRA to MP (from UP) given that its share price has plunged over 17% since the announcement of their poor results. At current share price level, we believe downside risk could be limited as we have already accounted for the earnings risks from their loss-making RAPID project.

Source: Kenanga Research - 8 Sept 2017