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Monday, November 30, 2015

Mitrajaya Holdings - Ascending to another high

Results

  • Mitrajaya posted another commendable set of results in 3QFY15 with revenue of RM231m (+59% YoY, -5% QoQ) and earnings of RM25.8m (+97% YoY, +12% QoQ).
  • Cumulative 9M earnings amounted to RM62.3m, increasing strongly by 66% YoY.

Deviation

  • 9M earnings made up 78% of our full year estimate (67% of consensus) which is within expectations.

Dividends

  • None. Usually declared in 4Q.

Highlights

  • Robust growth for construction. The construction division experienced the best of both worlds given topline growth coupled with margin expansion. Construction revenue for the 9M period almost doubled YoY (+94%) while EBIT margin expanded from 9.9% to 12.9% over the same period.
  • Secures RAPID contract. Mitrajaya in a 51:49 JV with Syarikat Ismail Ibrahim has been awarded 2 contracts by PETRONAS totalling RM186m for various civil and infra works at RAPID. The works are scheduled for completion within 22-32 months.
  • Decent level of job wins. With the recent contract, Mitrajaya’s YTD job wins currently stands at RM469m (FY14: RM1.1bn). We estimate its orderbook to stand at RM1.6bn, implying a superior cover ratio of 4.3x on FY14 construction revenue. Management is hopeful to add on more job wins before the year end.
  • Support from South Africa. 9M domestic property revenue was lower by 37% YoY, as Wangsa 9 project is at the initial construction stage. However, this was partially offset by a strong performance in South Africa with revenue up 73% YoY from the sale of completed bungalows.

Risks

  • Delays in construction and softening property market.

Forecasts

  • The recent contracts at RAPID do not alter our earnings forecasts as YTD job wins of RM469m is within our RM500m orderbook replenishment target for FY15.
  • We maintain our earnings forecasts as the results were in line and remain confident that FY15 will post another round of record earnings at RM80m (+49% YoY).

Rating

  • Maintain BUY, TP: RM1.95
  • Mitrajaya remains our top pick amongst the small cap contractors as it offers a compelling case of strong growth (3 year CAGR: 24%) at inexpensive valuations of 9.8x and 8.1x FY15-16 P/E.

Valuation

  • Our SOP based TP of RM1.95 implies FY15-16 P/E of 15.6x and 13x respectively.
Source: Hong Leong Investment Bank Research - 26 Nov 2015

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