Pintaras Jaya is well-positioned to capitalise on the strong prospects of its piling segment, backed by mega infrastructure projects and a structural shift towards high-rise developments. We maintain BUY with a lower MYR3.97 TP (17% upside) based on 10x 2016F (low end of the target P/E range of 10-18x for the construction sector) EPS plus net cash per share as at end-2015.

Robust prospects ahead. The prospects of piling contractors like Pintaras Jaya remain strong, backed by: i) mega infrastructure projects including MRT2 and LRT3, and ii) a structural shift towards high-rise developments that require more extensive piling works due to the scarcity of land in prime locations. The company’s key strengths are: i) its full range of piling machines, tools and accessories, ii) its ability to improvise piling solutions to suit diverse ground conditions given its experience – which spans more than two and a half decades in the local piling sector, and iii) its solid net cash position, which allows it to secure attractive discounts for key inputs. Thus, we are not overly concerned over its latest set of results, which came short of our estimates. Forecasts and risks. Post results, we cut FY16F earnings by 14.4%, but raise FY17F/FY18F earnings by 0.5% and 0.7% respectively, as we push back the recognition to a later date. Key risks include: i) any impaired ability to replenish its orderbook, and ii) lower profit margins arising from stiff competition.

Reiterate BUY, with a lower TP of MYR3.97. Although its earnings are set to improve moving forward, new job wins so far this year are at MYR189.4m (RHB’s FY16F: MYR250m) – which only came in the last two months. After our earnings revisions, and updating the company’s latest net cash position, our TP drops accordingly to MYR3.97 (from MYR4.08).

SWOT Analysis

Source: RHB Research - 23 Feb 2016