KUALA LUMPUR (Dec 21): Contractor Mitrajaya Holdings Bhd, which is tendering for RM4.8 billion worth of construction jobs locally, is targeting to secure RM1 billion worth of projects for the financial year ending Dec 31, 2016 (FY16).

Underpinned by an increase in construction order book, the group continues to expect double-digit growth next year, although not as high as in FY15.

Mitrajaya managing director Tan Eng Piow said, as the property market stays soft, construction will remain its earnings driver in FY16.

He expects the construction sector to remain strong next year, as there are many ongoing mega projects such as Mass Rapid Transit and Pan-Borneo Highway.

“We are always actively tendering for new jobs. Our target for 2016 is to secure RM1 billion worth of projects.” Tan told The Edge Financial Daily in an email interview.

According to Tan, for the total of RM4.8 billion, RM3.3 billion worth of projects are under active tender, while tender under preparation is worth RM1.5 billion.

These projects are all local, including a mixture of building works and also infrastructure projects.

“We hope to secure one or two more jobs before the end of the year. As the projects are not awarded yet, it is difficult to disclose the details of the projects,” Tan said, adding that the management is tendering on a competitive basis. As the group has been securing projects on a competitive basis, Tan said he does not foresee margin constraints.

Meanwhile, the group has an order book of RM1.48 billion, which can last approximately two years.

These projects, including two condominium projects with UEM Sunrise Bhd; MACC buildings at Precint 7, Putrajaya; Raffles American School, Johor; an apartment project with Putrajaya Homes; infrastructure works in Gambang, Pahang, from the East Coast Economic Region Development Council; Kelana Jaya and Ampang Line Extension projects; infrastructure works for the Refinery and Petrochemical Integrated Development project and a building project for Bank Negara Malaysia.

Supported by the construction sector’s revenue and net profit, Mitrajaya (fundamental: 1.5; valuation: 2.4) saw its net profit surge 97% to RM25.8 million in the third quarter ended Sept 30, 2015, from RM13.12 million last year. Net profit for the cumulative nine months also jumped 65.61% to RM62.3 million from RM37.62 million a year ago.

Tan said he expects the group’s profit growth to be maintained in FY15. He also sees the group will likely to achieve double-digit growth for FY16.

Despite the property market expected to remain soft, Tan said it would not have a significant impact on the group’s financial performance.

This is because in 2015, the property division is only expected to contribute about 11% of the group’s total revenue, with the rest from the construction division (86%) and healthcare (3%). Tan expects similar numbers for 2016. “Our property division is not a big division, so the soft market is not seriously affecting us,” he emphasised.

The group’s property venture in the pipeline is a mixed development project located in Puchong Prima with an estimated gross development value of RM1.5 billion. Currently, the group has land bank of 195.46ha, including its recent land acquisition in South Africa. “We will continue to expand our land bank if we identify good prospects, but no particular preferences,” he said.

Mitrajaya’s focus remains on its existing markets in Malaysia and South Africa.

The group recently expanded and opened a branch office in Kuching, Sarawak, under its construction division, and purchased a 87ha freehold land for future development in South Africa. “Our operations are currently in Malaysia and South Africa. We will continue to look out for good prospects within these two countries,” Tan said.

Meanwhile, the group is still in the midst of identifying a purchaser for its 51% stake in Optimax Eye Specialist Centre Sdn Bhd, a British laser eye correction chain, for RM5.1 million, and expects the deal to be finalised in the first or second quarter of next year.

“We have a few interested parties, but as the deal has not been finalised, we are unable to disclose further information,” Tan said.

Tan said the management will utilise the RM5.1 million for the group’s internal cash flow.

Mitrajaya shares closed two sen lower at RM1.19 last Friday, with a market capitalisation of RM763.5 million.

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This article first appeared in The Edge Financial Daily, on Dec 21, 2015. Subscribe to The Edge Financial Daily here.

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