• BUY, new MYR1.84 TP from MYR1.94, 17% upside, c.1% FY24F (Jun) yield. 1QFY24 core profit of MYR0.7m missed expectations at 9% and 10% of our and consensus’ full-year projections. The negative deviation was mainly due to slower-than-expected progress of newly secured contracts. While >80% of Pintaras Jaya’s orderbook is from Singapore, we believe it is poised to benefit from upcoming projects in Malaysia, as PINT was previously involved in piling works for the first Mass Rapid Transit (MRT) in 2017 and the Customs, Immigration, and Quarantine complex in Johor.

• Results review. Despite a 35% YoY revenue drop in 1QFY24, PINT’s construction arm saw LBIT of MYR1.2m for the quarter (1QFY23 LBIT: MYR2.9m). This was due to reversal of provisions for a rectification cost of MYR3.5m from completed projects. For 1QFY24, PINT secured MYR160m worth of new jobs across eight contracts in Singapore vs our FY24F new job target of MYR300m. The manufacturing division recorded 1QFY24 EBIT of MYR1.4m (1QFY23: MYR1.5m) due to higher depreciation costs from the new printing line which commenced operations in May. We believe margins for the segment may improve due to the downtrend in tin plate prices which eased as much as 26% from the peak in late January.

• Outstanding orderbook at end 1QFY24 was at MYR243m (0.8x cover ratio (end 4QFY23: MYR230m). 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 in the value of contracts awarded for Singapore residential projects (public and private sector) which rose 6% YoY in 1QFY24, as the bulk of PINT’s projects there are residential. Its tenderbook of c.MYR2.6bn consist mainly of Singapore jobs (>80%), enabling it to ride on Singapore’s robust construction demand.

• We cut FY24-26F earnings by 3-14% as we dial down our construction billings progress. Post earnings adjustments, we arrive at our new MYR1.84 TP which is pegged to an unchanged 0.8x FY25 (Jun) P/BV, inclusive of a 2% ESG discount. Target P/BV of 0.8x is in line with the average of Singapore and Malaysian piling peers.

• Rerating catalysts include securing contracts for Changi Airport’s Terminal 5 construction (expected in early 2025) and Terminal 2 extension given PINT’s previous work for Terminal 4 in 2015-2016. Domestically, a fasterthan-expected rollout of MRT 3 would serve as a catalyst, as PINT was previously involved in MRT1. We view the stock’s valuation as undemanding, trading at 0.6x FY24F P/BV (-2SD below its 5-year mean) in light of the aforementioned catalysts, and hence, maintain our BUY call.

• Downside risk: Slower-than-expected job replenishment.

Source: RHB Securities Research - 28 Nov 2023