• Maintain BUY, new MYR2.06 TP from MYR1.84, 20% upside. 1HFY24 (Jun) core earnings of MYR3.4m met our but beat Street estimates – making up 52% and 36% of full-year projections. We anticipate increased job opportunities from Singapore (SGD18-21bn forecasted construction demand from the public sector). Considering the potential construction upturn there owing to the pipeline of significant projects scheduled for 2024, we view Pintaras Jaya’s valuation as undemanding, trading at 0.7x FY25F P/BV (-1.5 SD from the 5-year mean). Hence, we maintain our call.

• Results review. 1HFY24 core net profit surged >100% YoY to MYR3.4m, widely driven by the receding cost pressures from loss-making projects secured prior to the Russia-Ukraine war as they approach completion. This helped offset the 26% YoY revenue drop during this period amidst lower construction activities, as most projects (especially in Singapore) were at their tail-end while newly secured ones were clinched at competitive rates. PINT’s manufacturing arm recorded a 1HFY24 EBIT of MYR2.7m (+43% YoY) due to improved gross margins and higher sales.

• An outstanding orderbook stood at MYR300m as at end 2QFY24 (0.9x cover ratio) vs MYR275m a year ago (with YTD new job wins worth MYR330m) includes a mix of railway-related and Housing & Development Board (HDB) projects in Singapore. Looking ahead, we see better job flows from there, as Singapore’s public sector projects rollout accelerates, supported by a c.SGD900m tenderbook. Major upcoming projects there for 2024 include new HDB developments, the Cross Island Mass Rapid Transit Line (Phase 2), Changi Airport's Terminal 5, and the Tuas Port development. We also anticipate the ongoing US-China tiff to attract more tech giants to expand their presence in Singapore, which could benefit PINT, given its experience in completing two semiconductor fabrication factories. With its strong Singapore track record, we think the group is well positioned to capitalise on the potential CY24-25 construction sector upturn.

• We lift our FY24F-26F earnings by c.9-14% post upward adjustments to our job replenishment assumptions. FY24’s job wins target is now MYR350m from MYR300m while FY25 and FY26’s job win assumptions have been bumped up to MYR400m from MYR350m. Such adjustments are premised on the growth of Singapore’s construction sector. Consequently, we derive a new MYR2.06 TP that is pegged to a higher 0.9x FY25F P/BV from 0.8x to account for the potential benefit from Singapore’s construction sector growth, which saw its GDP expand by 5.2% in 2023 (2022: 4.6%). We also lower PINT’s ESG score to 2.8 from 2.9 due to the lack of emissions disclosures. Hence, our TP incorporates a 4% ESG discount. A re-rating catalyst for PINT would be the securing of sizeable construction projects in Malaysia, as the bulk of the orderbook comprises Singapore jobs. Downside risks include slower-than-expected job replenishments and project delays.

Source: RHB Research - 23 Feb 2024