Pintaras Jaya’s 9MFY15 (Jun) results met our forecast. We maintain our BUY call, earnings forecasts and TP of MYR4.92 (21% upside). Being a dominant player in its sector, Pintaras Jaya is well-positioned to capitalise on the strong prospects of the piling segment, backed by the MRT2 and LRT3 projects, a proliferation of high-rise developments and capacity shortage – which should boost piling rates.

A decent 9MFY15. Pintaras Jaya’s 9MFY15 net profit came in at only 67% of our full-year forecast (consensus estimates are not available). However, we consider the results within expectations as we assume a bumper 4Q like the one in the last financial year, with higher profit recognition on account finalisation. In FY14, Pintaras Jaya’s 4Q net profit made up 32% of full-year net profit.

Positive industry outlook. The prospects for the piling segment are strong, backed by: i) the MYR25bn Line 2 of the Klang Valley mass rapid transit project (MRT2) and the MYR9bn Line 3 of the light rail transit (LRT3) project, ii) a proliferation of high-rise developments amid rising land scarcity in prime locations that require extension piling, and iii) a chronic shortage of piling capacity.

Forecasts. Pintaras Jaya’s balance orderbook is relatively low at MYR100m at present (vis-à-vis a recent peak of MYR295m in Apr 2014). However, we are not perturbed as with the available capacity, it is in the position to take on new jobs again. We maintain our earnings forecasts.

Risks. i) its ability to sustain its outstanding orderbook at about MYR150m, and ii) an escalation in input costs.

Maintain BUY. The company’s key strengths are its: i) full range of piling machines, tools and accessories, ii) in-depth knowledge of ground conditions, and iii) ability to secure cash discounts for key inputs, given its strong balance sheet. As at 31 Mar 2015, it had liquid assets (87% cash and 13% portfolio investment managed by external fund managers) worth a total of MYR184.5m or MYR1.14/share. We keep our TP at MYR4.92 based on 13x 2015 EPS of 37.9 sen, in line with our 1-year forward target P/E of 10-16x for the construction sector. At the current price, the stock trades at only 10.7x 2015 EPS, which we regard as highly attractive.

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.

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Source: RHB Research - 18 May 2015