We  maintain  our  BUY  call,  forecasts  and  MYR7.00  FV  following  the release  of  1QFY14  results  that  met  our  forecast.  Pintaras  offers exposure to  the  strong prospects of the  piling sub-sector in Malaysia, backed  by  the  Klang  Valley  MRT  project,  the  proliferation  of  high-rise developments,  and  the  chronic  shortage  of  piling  capacity  in  the market, which boosts piling rates.

• 1QFY14  net profit  eases.  Pintaras’  1QFY14  net profit  came in at only 20% of our full-year forecast (there is no consensus estimate). However, we  deem  the  results  within  our  expectations  as  we  expect  stronger quarters  ahead  as  progress  and  hence  billings  from  its  newly-secured contracts  accelerate.  1QFY14  net  profit  eased  35%/26%  q-o-q/y-o-y respectively,  as  newly-secured  jobs  have  yet  to  hit  significant  billing milestones.
• Forecasts. Maintained.
• Positive  industry  outlook.  The  prospects  of  the  piling  sub-sector  is strong, backed by: i) the MYR73bn Klang Valley MRT project,  which will keep the entire  value chain of the  construction sector  (including piling)busy  until  2019,  ii)  the  proliferation  of  high-rise  developments (residential, commercial and office), which require extension piling on the increasingly scarce  land in prime locations,  and iii) the chronic shortage of piling capacity in the market, which boosts piling rates. Typically, piling and  related  works  make  up  5-10%  of  total  project  value.  It  could  be higher, ie  10-20% of total project value  for certain infrastructure such as bridges, or if the ground conditions are inferior.
• Maintain BUY. Pintaras is able to pick the best jobs to bid, and put in the winning bids given its full range of piling machines, tools and accessories (which  reduces the need  for  outsourcing) and its in-depth knowledge of the  ground  conditions.  It  is  one  of  the  top  4-5  piling  companies  in Malaysia, each control a market share of 5-10%. Our FV is unchanged at MYR7.00,  based on 10x CY14 EPS of 70  sen, in line with our one-year forward  target  P/E  of  10-16x  for  the  construction  sector.  Its  balance sheet is strong with a net cash of MYR105.6m or MYR1.32/share as at 30  Sept  2013.  This  excludes  its  portfolio  investment  farmed  out  to external  fund  managers,  with  a  market  value  of  MYR46.3m  or  58 sen/share as at 30 Sept 2013.

Financial Exhibits

SWOT Analysis

Company Profile
Pintaras  is  a  piling  specialist.  Leveraging  on  its  core  competence  in  piling,  it  also  extends  its  range  of  services  to  the  provision  of foundation  systems,  earth-retaining  systems,  substructures,  basements  and  earthworks,  and  to  a  lesser  extent,  the  more  general building and civil engineering works. It has a smallish but profitable manufacturing outfit that produces industrial metal containers for the paint, chemical, lacquer, lubricant, confectionery and food industries.

Recommendation Chart

Source: RHB