Pintaras Jaya’s 1QFY15 (Jun) results met our forecast. We maintain our BUY call, earnings forecasts and TP of MYR4.92 (implying a 13% upside). Being a dominant player, Pintaras Jaya is well-positioned to capitalise on the strong prospects in the piling segment, backed by the Klang Valley MRT project, a proliferation of high-rise developments and capacity shortage – which should boost piling rates. 

A good start to FY15.Pintaras Jaya’s 1QFY15 net profit came in at only 19% of our full-year forecast. However, we consider the results within our forecast as profit recognition during the quarter was capped by certain projects that were at early stages of implementation. We expect profit recognition to accelerate over the course of the financial year (consensus estimates are not available). 

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 amid rising land scarcity in prime locations that require extension piling, and iii) a chronic shortage of piling capacity in the market, which should boost piling rates. 

Forecasts.We maintain our earnings forecasts. 

Risks.These include: i) Pintaras Jaya’s 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 its: i) full range of piling machines, tools and accessories, ii) in-depth 
knowledge of ground conditions, and iii) ability tosecure cash discounts for key inputs, given its strong balance sheet. As at 30 Sep 2014, it had liquid assets (87% cash and 13% portfolio investment managed by external fund managers) worth a total of MYR161.2m or MYR1.01/share. We keep our TP at MYR4.92 based on13x CY15 EPS of 37.9 sen, in line with our 1-year forward target P/E of 10-16x for the construction sector.

Source: RHB