• 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.

• The year started with a Bang and we do not expect it to end on a whimper with expectations of some of the 9MP projects all ready to roll out. Most of the mega projects were already announced earlier this year and that works would start soon. The commencement of the 2nd Penang Bridge is expected later this year, while the massive interstate raw water transfer project is already seeing tenders being made available. More importantly, we expect activities to pick up steam in the 4QCY07 and will forge forward thereafter. Our preliminary estimates show that a massive RM93bn of projects have already been awarded and set to boost domestic growth going forward.

• Pintaras Jaya (BUY; TP: RM2.60) One of our favourite construction companies that specialises in pilings and foundation works, sub-structure & basements, and earth retaining systems. Being one of biggest in the country will certainly help to strengthen the company’s potential amid the growing construction activities. Has a solid financial track record and is definitely, one of the top BUYs.

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%.

Last edited on Wed Sep 26th, 2007 05:20 by tanhin

a. This is a rather dead stock.

Not much trading activity at all. From an investment perspective, this is a non issue for some. But for some, the lack of volume could cause severe problem if one has huge stock holding to dispose! Yes, this issue is seriously subjective!

----------that is good for those who had no time to monitor and as long as no reason to sell or rather wouldnt find a reason to dispose off your investment,why the need to closedly monitor?
--------- when the market crashes down, it is time to look see look see and que to load up

b. The company dabbles in the share market.

Yet another highly subjective issue. Some prefer the company they invest in do not dabble in the stock market. Whatever excess cash a company has should be returned back in form of higher dividends back to the shareholders.

But for some, this issue is acceptable.

------- I am not happy with this aspect as the amount was quite substantial if compare to the profit.....but as long as the management didnot increase the exposure and still making profit form the investment,it is still acceptable.

As can be seen from above, Pintaras has done fairly well up to now. So there could be some justifications for it to do so. However, for the critics, the obvious question is 'What if bad times occur? Would Pintaras performance in its investments still yield such good results?'

how? highly subjective imo.
-------bad times?I would expect Malaysian Economy improving come 2008/2009 and the investment yield a better return.
-------Also, I would expect more contributions from piling, civil engineering and construction come year 2008 and 2009 unless all those IDR,NCER and ECER all kaput.

Last edited on Wed Sep 26th, 2007 06:09 by tanhin

---------- Yes, I do agree with you the complexity of disposal and the problem of disposing when one buying turnout to be a mistake for a stock that lack trading volume.
---------- I dont have an answer for it but I would think the initial reason of buying is very important and as long as the reason is still there, I will hold and hold.

1. I can make a mistake.
2. Things happening beyond my control. For example, something could happen to the company itself. Say a simple change in management or say something happen to the business economics of the company? In short, what if the reasoning to invest in the stock is no longer valid?

-----------May be I didnot make it clear and lump the two sentences into one that confuse you.
---------- With better economy expected(again, assumptions from me), I would expect better stock market performance and better return from their share investment

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Last edited on Wed Sep 26th, 2007 08:54 by tanhin