FY20 CNP of RM10.4m was spot on our estimate. No dividends as expected. Remain cautious over its prospects on huge replenishment risks which could potentially exhaust its order-book by 2HFY22. Maintain FY21E earnings of RM17.6m and introduce FY22E earnings of RM9.8m (-44% YoY). Reiterate UP on unchanged TP of RM0.215.

Within expectations. 4QFY20 CNP of RM3.9m (+23% QoQ) brought FY20 CNP to RM10.4m – spot on our forecast. No dividends as expected.

Highlights. 4QFY20 CNP was up 23% QoQ despite a weaker top-line (-18%) mainly due to lower effective tax rates (-29ppt). Dissecting the segments, construction revenue was down (-22%) due to its depleting order-book while property contributions surged 128% this quarter due to sales of completed inventories namely 280 Park Homes and Kiara 9.

FY20 CNP of RM10.4m improved YoY against a loss of RM47.9m as (i) its construction division did not suffer cost overruns as in FY19 and also (ii) thanks to lower financing costs (-60%) from lower debt level. Gross borrowings level in FY20 was 54% lower at RM113m vs. FY19 level of RM245m as Mitra gradually recovers the retention sums from completed projects while there were little working capital/retention sum outlays due to the absence of new jobs.

In desperate need for replenishments. YTD, Mitra has replenished RM200m worth of jobs against our FY21 forecast of RM350m. This brings their current order-book to RM593m which we still find underwhelming as its 2HFY22 revenue will likely take a steep plunge if Mitra does not secure more than our expected job replenishments (of RM350m each year for FY21E and FY22E). We find Mitra’s current situation undesirable as they would either (i) have to bid aggressively to secure jobs at the expense of thin margins (or potential losses) for job continuity or (ii) see its construction order-book drying up by 2HFY22 – dragging the group into losses.

Property division to remain weak with focus to clear completed inventories worth RM197m at (i) Wangsa 9 Phase 1, (ii) 280 Parkhomes, and (iii) Kiara 9. While unbilled sales stood at RM40m, we note that bulk of this (50%) is from its Wangsa 9 Phase 2 project which currently has poor take-up rates of 8%. Hence, we do not expect progress billings from this project will be significant as we think it is unlikely Mitra will speed up construction as this would only lead to undesirable cash burn in its balance sheet.

Earnings forecasts. Maintain FY21E earnings and introduce FY22E earnings of RM9.8m (-44% YoY). Note that we have imputed RM350m worth of replenishments for both financial years.

Maintain UNDERPERFORM and TP of RM0.215 based on unchanged 0.25x FY21E PBV (-1.5SD). We remain cautious over Mitra’s prospect as it faces huge replenishment risk which clouds profit visibility ahead.

Upside risks are: Higher-than-expected margins and replenishment from construction.

Source: Kenanga Research - 11 Mar 2021