Positive on Mitrajaya’s first win, but foresee continued headwinds

KUALA LUMPUR: Mitrajaya Holdings Bhd’s (Mitrajaya) first win for the year garnered positive views from analysts but they continue to foresee headwinds ahead for the group.

The research team at Kenanga Investment Bank Bhd (Kenanga Research) in a report, said while it was positively surprised by its sizeable RM200 million job replenishment which immediately exceeds its FY21 target of RM150 million, it pointed out that this comes on the back of aggressive tenders by the group which spells thin margins and little room for execution errors.

“We were positively surprised by this contract and its quantum given that Mitrajaya’s last contract win was more than a year back in November 2019 and this contract alone has exceeded our FY21 estimated replenishment forecast of RM150 million for the group,” it said.

However, it added, “While this contract win has reduced the replenishment risks for Mitrajaya in the immediate term, this comes on the back of aggressive tenders to sustain operations.

“Therefore, we believe the margins for this job would be skewed towards the lowerend with very little room for execution errors – or risk plunging into losses.”

Post win, Kenanga Research noted that Mitrajaya’s outstanding order-book is lifted to circa RM600 million (as of December 2020), providing revenue cover of slightly over a year.

“That said, on the back of tender book of circa RM1 billion, Mitrajaya is still aggressively aiming for further job wins to provide job continuity as most of their existing jobs are completing in mid-2022,” it added.

All in, Kenanga Research maintained its ‘underperform’ rating on the stock.

“We remain cautious over Mitrajaya’s prospects given the undesirable situation they are currently facing; either aggressively tender for projects to provide job continuity but face higher execution risks or see revenue take a plunge in 2H22 – dragging the group into losses.”