Lowering TP; maintain HOLD call

PINT’s 2QFY23 headline net profit of MYR2m included non-recurring items totalling a positive MYR3m. Excluding this, 2Q’s MYR1m core net loss took 1H core net loss to MYR2m. We cut FY23-25 earnings forecasts by 81-85%. On subdued earnings prospects, we change our valuation methodology to P/B from PER. We lower TP to MYR1.96 (-11%) based on 0.8x FY23E P/B (ROE of 1.3%). Maintain HOLD.

Losses still at the construction ops

2Q construction revenue fell 46% YoY (-26% QoQ) due to fewer projects secured alongside low productivity from on-going jobs. Contract values are also lower due to competition. Construction fell into a loss as on-going projects continued to be affected by higher raw material prices, higher labour costs and low productivity. Manufacturing revenue also declined (- 4% YoY, -11% QoQ) on lower sales volume, while higher material cost and opex affected PBT; manufacturing posted just MYR0.4m PBT in 2Q.

Subdued outlook at construction & manufacturing

Management expects a “very tough” FY23. While labour shortage issue in MY has eased, labour, material and fuel costs remain high. Thus, existing projects which were secured earlier, continue to suffer from cost overruns. Competition for new projects remains “very intense” due to the scarcity of new projects. Over at SG, management expects tender rates to remain very competitive but construction costs should stabilise. Its manufacturing op is also facing downward pressure on selling prices while material cost and opex remain elevated.

Cutting earnings forecasts

Outstanding order book has retraced to MYR275m end-Dec 2022 (from MYR350m end-Sep 2022), with minimal new jobs secured in 2QFY23, we estimate. We cut FY23/24/25E earnings by 84%/85%/81% on lower win rates for construction and lower margins assumptions. We expect subdued profits ahead. Positively, balance sheet remains strong with a net cash (+ financial assets) of MYR153m (92sen/shr) as at end-Dec 2022.

Source: Maybank Research - 1 Mar 2023