We trim our FY15 EPS forecast by 4% (dilution from ESOS shares) but raise our FV by 6% to MYR4.88 (from MYR4.61) after increasing our target P/E to 13x (from 12x) to factor in the improving investability of the stock. Pintaras Jaya is a good proxy to the buoyant piling segment backed by the Klang Valley MRT project, a proliferation of high-rise developments and capacity shortage – which should boost piling rates.

Investability improves. We believe that Pintaras Jaya’s investability has improved greatly over the last 6-12 months. First, its market capitalisation has grown by 75% to about MYR700m at present, from only c.MYR400m when we first initiated coverage on the stock in July 2013. Second, the piling segment as represented on Bursa Malaysia is evolving into a “one’s lonely, two’s company” environment, with the impending listing of a competitor. Thus, we believe that the piling sub-segment may now warrant more attention and a bigger following on the part of investors. Last but not least, we believe that investors are warming up to the company in tandem with the increased “face time” with management (mostly in private group meetings), since we initiated coverage.  

Positive industry outlook.  The prospects for the piling segment are strong, backed by: i) the MYR73bn Klang Valley mass rapid transit (MRT) project that will keep the entire value chain of the construction sector (including piling) busy until 2021, ii) a proliferation of high-rise residential, commercial and office developments on rising land scarcity in prime locations that require extension piling, and iii) the chronic shortage of piling capacity in the market, which will boost piling rates.

Forecasts. We trim our FY15 EPS forecast by 4%, largely to factor in the dilution from 7.24m ESOS shares at an issue price of MYR2.83.

Risks. These include: i) its ability to sustain its outstanding construction orderbook at about MYR300m, and ii) an escalation in input costs.

Maintain BUY. The company’s  key advantages over its rivals are: i)  its full range of piling machines, tools and accessories, ii) its in-depth knowledge of ground conditions, and iii) its ability to secure cash discounts for key inputs, given its strong balance sheet. We raise our FV by 6% to MYR4.88 (from MYR4.61) after raising our target P/E to 13x (from 12x) to factor in the stock’s improving “investability”. Our FV is now based on a 13x revised CY15 EPS of 37.5 sen, in line with our 1-year forward target P/E of 10-16x for the construction sector.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

Pintaras Jaya is a piling specialist. Leveraging on its core competence in piling, it also extends the range of services it offers 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 small but profitable manufacturing outfit that produces industrial metal containers for the paint, chemical, lacquer, lubricant, confectionery and food industries.

Recommendation Chart

Source: RHB