Within the cyclical construction sector, Pintaras (Fundamental: 3/3, Valuation: 2.1/3) — a leading foundations and piling specialist— stands out for its consistent earnings growth, high margins and cash rich balance sheet.

The company is currently running at full capacity up to mid-2015. Its orderbook includes the iconic 118-storey Warisan Merdeka. Piling, civil engineering and construction works accounted for 82% of sales in FY June 2014 —and more importantly, earns a smart 35% margin.

Pintaras has undertaken works for the first phase of the MRT project and stands a good chance of securing jobs for the second phase. For the first phase, it has undertaken bored pilling works from the One Utama to The Curve stations, and other works from the Dataran Sunway to Section 17 stations.

Pintaras attributes its excellent financial performance to a confluence of factors. It is a specialist with a good track record and reputation, operating in a niche market. The company is selective when it comes to projects and selects only those that maximise utilisation of its existing fleet of heavy equipment. 

And after being in the business for 25 years, most of its equipment has been fully depreciated and the company is able to procure materials on favourable terms.

Over the past five years, revenue almost doubled from RM105.7 million in FY June 2010 to RM201.9 million in FY2014, while net profit rose from RM20.7 million to RM54.2 million. During that period, operating margin and net margin averaged 33.34% and 25.35% respectively.

Pintaras had net cash of RM140.3 million as at September 30, 2014, or 87 sen per share. Dividends totaled 15 sen per share in FY2014, giving a yield of 3.4%. The stock is trading at 2.2 times book with a trailing 12-month P/E of 12.9 times.

This article first appeared in The Edge Financial Daily, on January 27, 2015.

http://www.theedgemarkets.com/my/article/insiderasia%E2%80%99s-stock-day-pintaras-jaya