Last Friday, MITRA announced that they bagged a hotel refurbishment work from Idaman Putrajaya Sdn. Bhd. for a total consideration of RM89.9m. Neutral on win as it is within our job replenishment expectations. No changes to FY19-20E earnings. Maintain UP with an unchanged SoP driven TP of RM0.200.

News. Last Friday, MITRA announced that they bagged a hotel refurbishment work from Idaman Putrajaya Sdn. Bhd. for a total consideration of RM89.9m and is expected to complete in 38 weeks.

Neutral on win. This would be MITRA’s first job replenishment in FY19. However, we are neutral on the win as it is within our replenishment assumptions of RM300.0m for FY19E. Assuming a pre-tax margin of 8%, the project is expected to contribute an aggregate net profit of c.RM5.4m.

Outlook. Post win, MITRA’s outstanding order-book stands c.RM1.0b with a year visibility, and still actively tendering for projects in the local market. However, we opine the local job flows to be slow as we only expect mega projects to kick start earliest by year-end. As for its property development division, its unbilled sales stand at RM110.0m, also a year visibility.

Earnings estimate unchanged. No change to our FY19-20E earnings as the replenish work is still within our expectations.

Maintain UNDERPERFORM with an unchanged SoP-derived Target Price of RM0.200, implying a FD FY20E PER of 8.0x vs. ascribed valuation range of 6.0-11.0x applied on small-mid cap contractors under coverage, which reflects the following considerations: (i) uncertainty in terms of order-book replenishment, (ii) declining margins and (iii) five consecutive quarters of disappointment.

Upside risks for our call are: (i) higher-than-expected margins, (ii) better-than-expected billings from construction works and property segment, (iii) greater-than-expected contract wins.

Source: Kenanga Research - 24 Jun 2019