9M17 CNP of RM53.3m is within our/consensus expectations accounting for 76%/80% of full-year estimates. No dividends declared as expected. Maintaining our FY17- 18E earnings forecast. We strongly believe the sell-down of MITRA’s shares (-39% YTD) is unwarranted given their growth prospects and stellar execution track record. Hence, we reiterate our OUTPERFORM call with an unchanged SoP-derived TP of RM1.09/0.94.

Inline. 9M17 CNP of RM53.3m is within our/consensus expectations accounting for 76%/80% of full-year estimates. No dividends declared as expected.

Results highlight. 3Q17 CNP of RM21.2m improved 61% QoQ mainly due to; (i) better construction PBT margins (+3ppt) as losses from their RAPID project narrowed from c.RM13m in 2Q17 to c.RM1m in 3Q17, and (ii) lower effective tax rate of 24% (-23ppt).

9M17 CNP was down 26% YoY despite the higher revenue (+29%) due to weaker construction PBT margin of 4% (-8ppt) as; (i) they incurred losses for their RAPID project, and (ii) costs for construction materials and labour increased.

Outlook. YTD, MITRA has surpassed our RM800m replenishment target for the year, registering RM920m of new contracts. Outstanding construction order-book stands at RM1.7b providing visibility for 1.5-2.0 years. Meanwhile, its property unbilled sales stands at RM200.0m whereby the bulk is from Wangsa 9 Phase 1 and 2. Given that Wangsa 9 Phase 1 and 2 is due for delivery in FY18, we believe they would be ripe for advance billings stage in FY18. Also, Wangsa 9 Phase 3 (GDV RM300; last phase) will be launched in Jan 2018 and construction of the foundation is currently underway (at c.80%). Since Wangsa 9 Phase 3 construction in already in progress, we note that billings from this project can be recognised immediately once the project is launched.

Maintain earnings. We make no changes to our FY17-18E earnings estimates driven by FY17-18E replenishment target of RM0.8-1.0b. While YTD contracts is win at RM920m, we hold our FY17E replenishment target of RM800m unchanged given that one of the newly secured contract (worth RM132.5m) will only start construction in Aug 2018 and profit contributions would only come in from FY18.

Valuations. Post results, we reiterate our OUTPERFORM call with an unchanged SoP-derived cum/ex TP of RM1.09/RM0.94. We strongly believe the sell-down of MITRA resulting in a plunge of 39% YTD caused by two waves of unfortunate news has been overdone. Going forward, its prospects are brighter as we expect; (i) less earnings risks from its RAPID project as most losses had been recognised in 2Q17 and (ii) the proposed rights issue to pare down debts at its construction subsidiary level would set MITRA towards a stronger footing for further order-book growth.

In addition, we highlight that MITRA is currently trading at 6.3x FY18E PER* which is at attractive levels vs. small-mid cap peers which are trading at Fwd PER levels of 9.1x-14.9x.

All in, we remain confident on MITRAs management due to their: (i) stellar historical track record which had not failed expectations since coverage initiation in FY15 with an exception due to the recent let-down in 2Q17 due to unexpected losses from RAPID, (ii) strong FY18E earnings growth trajectory of 40%, and (iii) relatively better dividend yield of 2.9% which is the highest amongst peers’ average of 1.9%.

Source: Kenanga Research - 29 Nov 2017