• Keep BUY with MYR1.94 TP, 30% upside and c.1% yield. FY23 (Jun) core net loss of MYR8.6m was below our and Street’s full-year earnings projections of MYR5.0m. This was mainly due to higher-than-expected tax expenses (>100% tax rate) arising from deferred tax assets particularly in 4QFY23. A normal run-rate tax rate in 4QFY23 would have led Pintaras Jaya to record a FY23 core net loss of just c.MYR1.5m. Post 4QFY23, management guided that the effective tax rate may normalise.

• Performance review. PINT’s construction arm reported a MYR5.0m loss before interest and tax (LBIT) in FY23. The segment saw its first positive EBIT in 4QFY23 after three straight quarters of LBIT (with narrowing trends) as cost pressures receded with some of its projects reaching beyond the work intensive phase. For FY23, PINT secured MYR278m of new jobs while MYR72m was secured so far in 1QFY24. Meanwhile, the manufacturing division (13% of revenue) recorded a MYR2.9m EBIT in FY23 (FY22: MYR7.5m) as tin plate prices rose 30% over the year with PINT being unable to pass through the costs to customers but margins may improve due to current softer tin plate prices.

• PINT’s outstanding orderbook as at end FY23 stood at MYR230m (0.8x cover ratio (end FY22: MYR240m). Looking ahead, we expect cost pressures faced under private property development projects (with no cost escalation clauses) in Malaysia secured prior to the Russia-Ukraine crisis to recede further as they reach their tail-end with new projects pricing in the latest normalised building material price trends. We also take comfort from the value of contracts awarded for residential projects (public and private sector) in Singapore which increased 26% YoY to SGD6bn in 1HCY23 as bulk of PINT’s projects in Singapore come from residential projects. The group’s tenderbook of c.MYR2bn consists mainly from Singapore jobs at c.85%, enabling it to ride on Singapore’s robust construction demand.

• We maintain our FY24F-25F earnings as we have factored in the normalisation of building material costs particularly for Malaysia projects. We also introduce FY26F earnings with a job replenishment target of MYR350m. Post updating FY23 figures into our model and rolling forward our valuation base to FY25F, our TP (pegged to an unchanged 0.8x FY25 (Jun) P/BV with a 2% ESG discount) of MYR1.94 remains after the FY25F BVPS was slightly lowered from MYR2.49 to MYR2.48. The target P/BV of 0.8x is in line with the average of Singapore and Malaysian piling peers.

• Rerating catalysts include securing a contracts for Changi Airport’s Terminal 5 construction (expected in early 2024) and Terminal 2 extension given PINT’s job for Terminal 4 during 2015-2016. Domestically, a faster-than-expected rollout of Mass Rapid Transit (MRT) 3 may serve as a catalyst as it was previously involved in MRT1. We view the stock’s valuation to be undemanding, trading at 0.6x FY24F P/BV (-2SD below its 5-year mean) in light of the aforementioned catalysts and hence, our BUY call. Downside risks: slower-than-expected job replenishment.

Source: RHB Securities Research - 28 Aug 2023