INVESTMENT MERIT

- Piling up strongly. Pintaras Jaya (“PTARAS”) is one of the bright stars in the construction industry given its consistent double-digit net margin of around 20% in the past 3 years and an impressive 3-year CAGR of 20% in net profit, which hit RM35.8m in FY12. 

- Healthy orderbook. Due to the nature of the industry, piling contracts have shorter work cycles (average 9 months) as compared to civil and structural construction jobs (average 24 months). PTARAS’s outstanding orderbook which currently stands at c.RM150m could comfortably sustain the group turnover churn until FY14.

- Bright orderbook replenishment prospect.  To recap, PTARAS secured a total of c.RM130m worth of jobs in 2013. Going forward, we are positive on the construction sector as many high-profile and high-value projects are scheduled to commence construction, i.e. MRT2, TRX, Rapid project as well as on work-flows from other property development projects in the pipeline. Hence, we believe its orderbook replenishment momentum will be maintained in 2014.

- Consistent dividend payout ratio. While PTARAS does not have a formal dividend policy, it has been consistently rewarding its shareholders by paying an average dividend payout ratio of 40% for the past 3 years. Based on its historical track records, we are projecting a NDPS of 30.4sen for FY14, implying a decent net dividend yield of 4.9%. Apart from that, PTARAS has proposed a bonus issue of 1 bonus share for every 1 PTARAS shares held to further reward its shareholders.

- Strong balance sheet in 3Q13.  Its cash balances and deposits position is strong with a net cash position of RM110.4m which translates into RM1.38/share.

- Trading buy, but… PTARAS rallied strongly, gaining 23.6% since early-August to its all-time high of RM6.44. Although we value PTARAS at RM6.80, based on a targeted FY14 PER of 10x (in line with our average PER of the small-to-mid size construction companies), we suggest investors to accumulate on weakness at between RM5.50-RM5.60 for a potential upside of more than  20%.

TECHNICALS

- Resistance: RM6.48 (R1), RM6.65 (R2)

- Support: RM6.00 (S1), RM5.72 (S2)

- Comments: PTARAS’s share price fell 28 sen to close at RM6.16 yesterday as it took a breather amid an explosive surge up recently. Trader may apply Buy-On-Weakness strategy at RM6.00 psychological support level as the overall uptrend remain intact.

BUSINESS OVERVIEW

Pintaras Jaya (“PTARAS”) is a piling specialist which expertise covers piling and foundation systems, earth retaining systems, substructures, basements and earthworks, building works, and civil engineering works. Over the years, Ptaras has completed several larger piling and earthworks projects exceeding RM10m, i.e. (i) piling works for the Customs, Immigration and Quarantine Complex (RM30m), (ii) earthworks, piling and misc works at  JB Sentral (RM22m); and (iii) piling and sub-structure works for Villa Wangsamas (RM21m) and other projects.

BUSINESS SEGMENTS

- Piling, construction.  Piling and foundation activity is the main contributor to the group’s earnings, at 79% of its FY12 revenue.

- Manufacturing.  PTARAS ventured into the manufacturing industry back in 1999 by acquiring Prima Packaging  Sdn Bhd which manufactures small cans and tight head pails. In 2004, its manufacturing division was further expanded when it acquired Corplast Packaging Industries Sdn Bhd. Currently, its manufacturing division contributes 21% of revenue.

Source: Kenanga