1QFY20 core net loss (CNL) of RM1.1m is deemed within our loss estimate of RM29m as we anticipate wider losses in 2QFY20 from peak MCO disruption. No change in earnings and MARKET PERFORM call maintained along with TP of RM0.20. While MITRA may have probably experienced its worst year in FY19 on huge losses in its construction division, we expect coming quarters to remain challenging especially when its order-book is gradually drying up amid bleak replenishment prospects.

Within expectations. 1QFY20 core net loss (CNL) of RM1.1m is deemed within our FY20E loss of RM29m as we expect 2QFY20 to report wider loss from the peak of MCO disruptions. No dividends as expected.

Highlights. QoQ, 1QFY20 CNL of RM1.1m was down marginally (by RM0.4m) despite a huge dip in revenue (-36%) as the previous quarter had a positive tax of RM17.6m arising from deferred tax assets. Looking at its pre-tax level, which we find more reflective of operations, 1QFY20 LBT (loss before tax) of RM1.9m improved QoQ from a LBT of RM22.2m as 4QFY19 incurred much larger losses at its construction division due to higher than budgeted costs. Similarly, 1QFY20 CNL actually improved YoY from a loss position of RM4.3m due to lower losses at its construction division.

Relatively better days. With lower losses at its construction division, MITRA is likely to clock in better performance in FY20 as compared to FY19A which turned in a loss of RM48m. Nonetheless, MITRA is still far from showing any profits given their dwindling order-book from the lack of building works in the market. Case in point, they only managed to replenish RM300m worth of building works in the past two years vs. peak replenishment of RM800m/annum from 2014-2017. Current outstanding construction order-book of RM630m would only last them slightly over a year.

On a brighter note, successful collection of payments from completed projects in 1QFY20 had brought net gearing down to 0.21x (from 0.32x in 4QFY19). Net debt level was also reduced by a good 35% to RM150m (from RM228m). Accordingly, financing costs during the quarter also saw a reduction of 40% QoQ.

Estimates unchanged post the 1QFY20 results.

Maintain MARKET PERFORM with an unchanged TP of RM0.20 based on 0.25x FY21E PBV (-1.5SD). While the group’s balance sheet risk has tapered down slightly, it still faces replenishment risk amidst the current challenging period on the back of a dwindling order-book. We opine that current outstanding jobs would only be sufficient to sustain operational working cap with little earnings to show for, if any.

Downside risks for our call are: (i) larger than expected losses from construction, and (ii) slower-than-expected billings from construction works and property segments.

Source: Kenanga Research - 26 Jun 2020