Mitrajaya seen to have more jobs coming

by **Cals** Wed 14 Oct 2015, 01:47

Mitrajaya seen to have more jobs coming

By Kenanga Research / The Edge Financial Daily | October 13, 2015 : 10:08 AM MYT

Mitrajaya Holdings Bhd
Oct 12 (RM1.17)
Maintain outperform with unchanged target price (TP) of RM1.63: Our TP implies 7.3 times forward price-earnings-ratio (PER), which falls at the lower end of the small mid-cap contractors’ forward PER range of 7-13 times.

Given that the stock is still trading at single-digit valuation, i e financial year 2016 estimate (FY16E) to PER of 5.2 times, it offers a potential total upside of 42.5%, including dividend yield of 2.2%.

Last Friday, [size=16]Mitrajaya Holdings Bhd (Mitrajaya) ([You must be registered and logged in to see this image.] Valuation: 2.00, Fundamental: 1.50) announced that it had secured a RM52.2 million main infrastructure contract for Pahang Technology Park in Gambang, Pahang from the East Coast Economic Region Development Council Package 1B — 1st Level Infraworks.

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The infrastructure work spanning 78 weeks is expected to be completed by April 2017, covering arterial road, drainage, sewerage, water supply system, external electrical, external telecommunications and landscaping.

We are “neutral” on this contract as it is within our FY15E order book replenishment assumptions of RM700 million. Year to date, Mitrajaya has secured around RM282.2 million worth of contracts, making up 40.3% of our FY15 new contracts assumption of RM700 million.

Going forward, we are still expecting more job flows in coming months, given that Mitrajaya’s tender book is mostly focused on Putrajaya where the group has an excellent track record for the past 10 years.

However, we do not rule out that replenishment could come in slower than expected due to timing differences. Nonetheless, we still believe that our target is still achievable, as the group has a historical track record of securing over RM500 million jobs per annum for the past three years.

Moreover, our assumptions are conservative compared to management’s target, which is still optimistic about achieving a target of RM1 billion by end-FY15, supported by its tender book of RM2 billion.

Hence, we are keeping our order book replenishment assumptions for now, pending further updates from management.

We reaffirm our positive view that the construction division should be able to sustain at least for the next three years, driven by government’s spending on infrastructure projects and development of affordable housing projects under the 11th Malaysia Plan.

The group’s current outstanding order book of RM1.55 billion provides visibility for at least two years.

While its property division will be driven by its Wangsa 9 project (Gross Development Value [GDV]: RM680 million) and upcoming project in Puchong Prima (GDV: RM1.5 billion) by end-2015, we expect some slowdown in the property segment, given the current drag in property sales.

However, we believe this should not impact the group significantly, given that both projects’ attractive locations which are adjacent to LRT stations, hence providing convenience and connectivity, are strong selling points. — Kenanga Research, Oct 12
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