Mitrajaya Holdings Bhd from Kenanga

Mitrajaya Holdings Bhd Last Price RM0.75
Kenanga Trading Buy RM1.13 Earnings Reached Inflection Point Consensus N.A. N.A.
By Iqbal Zainal l mdiqbal@kenanga.com.my

INVESTMENT MERIT
• Mitrajaya’s earnings have reached an inflection point after its core net
profit (netting off the RM4.2m land disposal gain in Rawang) grew
significantly by 40% to RM25.1m in FY13, driven its construction and
property divisions. According to the management, its orderbook has
reached its all-time high of RM1.2b (3.3x to FY13 revenue), 140% higher
than that of its previous historical high of RM500m. As for its property
division, there is RM80m locked-in sales, which will be recognised this year
and about RM146m ready stock yet to be sold. Based on our conservative
analysis, we forecast Mitrajaya’s core earnings could at least report high
double digit net profit growth of 52% and 31% in FY14 and FY15. This is
substantially higher than that of our construction universe’ aggregate FY14-
FY15 earnings growth forecast of 16%-9%.

• Tenderbook of RM1.75b, targeting to win at least RM300m this year.
Tenderbook includes: Petronas RAPID project (RM600m), building works
for Ikano Cochrane (RM350m), infra projects for ECERDC (RM300m),
building works for Bandar Setia Alam (RM300m), and building works for
Putrajaya (RM200m). The management expects to win at least RM300m
this year and that, we believe, will be coming mainly from building works in
Putrajaya and other infra projects. Note that Mitrajaya has established a
long-term relationship (10 years) with Putrajaya Holdings through its
excellent project delivery track record. The latest project they secured with
Putrajaya Holdings Bhd was the RM427m MACC Building last year. With
this track record and background, we believe Mitrajaya is well-placed to win
more contracts from Putrajaya.

• Key catalyst for property division: Wangsa Maju. Mitrajaya will be
launching a property project comprising 3-blocks of luxury condominiums in
Wangsa Maju starting 4Q2014. Total GDV for the whole project is estimated
at RM650m and it is located right opposite Wangsa Walk Mall and is only
150m away from Sri Rampai LRT station. Despite the property cooling
measures, we believe this project will achieve strong take-up rates due to
the strategic location. According to the management, 1st phase of the project
will be around RM200m and we expect this project to contribute significantly
from FY16 onwards.

• Other businesses to support earnings growth. We understand Mitrajaya
has other businesses, including (i) a 51% stake in Optimax Eye Specialist
Sdn Bhd, one of the largest optical companies in Malaysia and