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SMALL-CAP construction firm Mitrajaya Holdings Bhd has delivered major gains in its earnings and stock price over the past year. After exceeding analysts’ expectations in its latest full financial year (FY2014), the group is well-positioned for another year of record earnings, thanks to a burgeoning RM1.9 billion order book.

The company’s share and warrant prices have nearly doubled since mid-December. Its warrant price has climbed to a high of 78 sen on March 16 from a low of 32.5 sen on Dec 15 last year.

It is worth noting that the warrant is trading at a discount to its mother share compared with a year ago when the premium was as high as 70%. At its March 31 close of 72.5 sen, Mitra-WC was last traded at a 4.41% discount to the underlying stock, which closed at RM1.70 on the same day.

Mitrajaya (fundamental: 1.70; valuation: 1.80) has a clean balance sheet without much borrowings. The group is primarily involved in construction and civil engineering, while its property segment is the next-largest revenue contributor.

Mitra-WC is a cheap proxy for investors optimistic on its near-term prospects. It carries an exercise price of 90 sen and has a one-to-one conversion ratio. The warrant expires on July 4, 2016.

Apart from a record-high order book, the company is targeting an additional RM600 million worth of construction jobs this year, says Kenanga Research in a Feb 26 report. Its property division has designated a 15-acre parcel of land in Puchong Prima for a mixed-development project with a gross development value of RM1.5 billion, says the analyst firm.

For the financial year ended Dec 31, 2014, Mitrajaya posted a net profit of RM53.74 million, an 83% increase from RM29.32 million previously. Revenue showed similar jump, with RM520.21 million in FY2014 compared with RM338.44 million in FY2013.

Kenanga pegs a fair value of RM1.95 for Mitrajaya and believes further upside potential would be realised over the next 12 months.

“The FY2014 net profit came in way above our expectations at 138% of our full-year forecast. This year, Mitrajaya is expected to enter a new and even higher earnings base contributed by the growing order book as well as property sales, with potential revenue approaching the RM1 billion mark for FY2015,” says Kenanga analyst Iqbal Zainal.


Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Visit www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in Capital, The Edge Malaysia Weekly, on April 6 - 12, 2015.

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