KUALA LUMPUR (April 7): Despite the closure of non-essential services in Singapore until May 4, 2020, Pintaras Jaya Bhd remains RHB Research’s top pick for the construction sector for its strong balance sheet and its presence in the city-state.
In a note, RHB Research maintained the stock’s “buy” call but cut its target price (TP) to RM3.20 from RM3.31 previously, implying a 29% upside and 6% yield.
It said Pintaras’ new TP was derived after pegging its 12 times price to earnings (PE) ratio — which is close to one standard deviation below the construction index’s five-year mean — to its financial year ending June 30, 2021 (FY21) construction earnings per share.
The research house said there were still plentiful job opportunities across the causeway, which is reflected in its tenderbook of RM3.3 billion as at December 2019.
Year to date, its orderbook stands at RM446 million — inclusive of new construction orders worth RM336 million — with 80% of the value derived from Singapore jobs.
“Despite an overall challenging environment on the local front, we still find value in the stock.
“Among its peers, Pintaras continues to stand out given its resilient balance sheet that is backed by net cash. Also, the company’s strong foothold in Singapore should not be overlooked, with Pintary International Pte Ltd (100% owned by Pintaras) being one of the largest [piling] specialists in the country, in terms of fleet size,” the research house said.
RHB Research said it was cutting the earnings forecast of Pintaras’ FY20, FY21 and FY22 by 14%, 5% and 5% respectively in light of the temporary disruption in work progress.
The new forecasts also factor in slower progress billings and lower net margins on existing orders.
The research house is also rolling over its base year to FY21 to better reflect its valuation a year from now.
In a bourse filing yesterday, the group announced that its operations in Singapore would be temporarily closed from April 7 to May 4 to stop the spread of Covid-19.
This is as the construction sector was placed under the list of non-essential activities during this period.
At 10.14am, shares in Pintaras were up 10 sen or 40% at RM2.50, valuing the group at some RM413 million.