Thursday, July 05, 2007

Pintaras Jaya

My Dearest Lina,

Regarding
Pintaras Jaya. Pintaras is a piling and foundation construction expert. You can read the company profile here and for its manufacturing profile here.

Here is their earnings track record.



Which can be broken down into the following segments.



1. Pintaras has done rather well since 2000. Yes, there is a blip in earnings for fiscal 2001. Here is what happened as explained by the company in its earnings notes.

  • The fourth quarter loss is mainly due to exceptional losses of RM7.33 million, comprising a provision for write down in the value of an investment property of RM2.58 million, a provision for other charges of an investment property of RM3.0 million and a provision for diminution in value of quoted investments of RM1.75 million.

This can be confirmed if you look at the second table. The property investment arm for Pintaras has been dismal.

Previously, from 2002 to 2006, I always believed that Pintaras has been a decent consturction company but it looked really like a company in their own comfort zone - ie decent with lacklustre or no growth. And the earnings - around 10 mil per annum looked rather smallish.

However, I believe this has changed.

And as can be seen in the second table, the piling and civil engineering sector has been doing pretty well and this does indicate that there is indeed a tremendous change of fortune happening in Pintaras Jaya.

2. Balance sheet.

It's cash balances is highly admirable.

Pintaras Jaya had a 3 for 5 bonus issue in 2002.

However there are 2 disappointments for me. Despite the healthy cash flow, dividends could perhaps be much better.

Secondly, it dabbles in the share market. ( This was discussed on Sahamas ( here ).

3. Yes, you are correct that CIMB had a research article. And as per your request, the following is how they valued the stock.

  • Valuation

    Immediate beneficiary of 9MP. Pintaras is expected to be one of the immediate beneficiaries of the kick-off of 9MP infrastructure projects over the next few quarters. This is because piling and foundation work is needed before construction work can begin on most infrastructure projects.

    Positioned for the upturn. The group has already positioned itself to ride this infrastructure boom, spending RM20m on equipment in the past 18 months that will enable it to undertake as much as RM15m worth of works monthly. Busy with private projects for now… The group is currently busy with piling works for property projects, especially high-rise condominiums. Construction work from the government sector should pick up quickly once 9MP infrastructure projects take off over the next 1-2 quarters.

    SOP to value the stock. In view of its strong net liquid asset and cash position, we believe that sum-of-parts valuation (SOP) is the appropriate tool to value the stock. Pintaras’s balance sheet is debt free and has RM60.8m net liquid assets and cash, equivalent to RM0.76/share.

    SOP at RM3.42.
    We have conservatively valued its construction division at 9x CY08
    P/E, a 25% discount to our 12x CY08 P/E target due to its small market capitalisation, the short-term nature of its contracts and its tight free float.
    We tag a conservative CY08 P/E of 6x to its metal container manufacturing division in view of its flat earnings growth. Based on these low-ball assumptions, Pintaras’s SOP valuation is RM3.42.

    This values the stock at 10.7x P/E ex-cash. We estimate that Pintaras could record around RM20m operational net earnings (exclude investment and interest income) or 25 sen EPS in FY08. Our RM3.42 SOP valuation implies a reasonable ex-cash FY08 P/E of 10.7x.

    Higher DPS? The company has been paying 5.0 sen final DPS annually over the past three years. We believe it is likely to up its final DPS in FY07, which it can afford to do given its strong net cash position and estimated 30 sen EPS in FY07. Assuming that it doubled its final DPS to 10 sen, gross dividend would be an attractive 5.6%.

Do feel free to join that discussion posted at Sahamas ( here ).

rgds

1 comments:

Ben & Elisa said...

From financial report wise the company looks healthy but we have to look at the disposal of shares by PNB in the past few months. This may be an indication something is not right.