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Mitrajaya sees exciting growth ahead

KUALA LUMPUR: Construction firm Mitrajaya Holdings Bhd’s order book is at an all-time high of RM1.2 billion. With that the company is positive on churning out strong earnings growth at least in the next two years.

In an interview, managing director Tan Eng Piow (pic) told The Edge Financial Daily that Mitrajaya was targeting to achieve revenue of RM500 million to RM600 million for current financial year ending Dec 31 (FY14), and at least RM600 million for FY15.

A revenue target of RM500 million would mean revenue growth of 48% compared with its revenue of RM338 million in FY13 and RM250.5 million in FY12. Using the net profit margin of 9% for FY13 as the yardstick, Mitrajaya is expected to achieve a net profit of RM43 million, or 11 sen per share.

Mitrajaya’s main line of business is in the construction of infrastructure projects and building works. It aims to secure an additional RM300 million worth of jobs to boost its order book to RM1.5 billion for FY14.

“We have seven more months [to the end of FY14]. We are quite confident in securing an additional RM300 million worth of jobs,” said Tan, adding that its construction order book had averaged about RM600 million in the past.

The company derives some 64% of its revenue from its construction division.

The company recently inked a RM277.4 million deal with UEM Sunrise Bhd to build a condominium block at Symphony Hill in Cyberjaya. The largest outstanding contract in its order book is an RM428 million job involving the Malaysian Anti-Corruption Commission building in Putrajaya.

“We are tendering for some of the infrastructure and building jobs, mainly from government-linked companies. We also have two jobs with the East Coast Economic Region,” said Tan, adding that the company is currently tendering for RM1.75 billion worth of construction and infrastructure jobs.

He said that the average size of jobs handled by Mitrajaya in the past was between RM50 million and RM100 million, but the value has now exceeded RM100 million, reflecting the company’s growth.

Other jobs in its tender book include Petroliam Nasional Bhd’s refinery and petrochemical integrated development project in Johor and building works at Bandar Setia Alam in Putrajaya and Ikano Power Centre at Jalan Cochrane, Kuala Lumpur.

Apart from the record high order book, the company’s property development segment could be another growth engine.

“In the next couple of years, the potential to realise all these landbank in terms of value would give us a substantial cash flow. In the 2015 to 2016 period, our group turnover should increase quite [significantly],” said Tan.

Mitrajaya is preparing to unlock the value of its over 200 acres (81ha) of landbank in Banting, Selangor and Melaka.

“We have no plans in terms of acquisition of new land, only those in developing what we already have to realise its profit and potential,” said Tan.

The recent spike in Mitrajaya’s share price was partly driven by its undervalued landbank, which has not been revalued for many years. Tan said the value of the company’s 257.65 acres of landbank is estimated to have almost quadrupled to RM623.17 million from its book value of RM160.55 million as at end-2013.

The estimated landbank value is nearly double that of the company’s market capitalisation of RM337 million based on its share price of 85.5 sen.

Its share price had hiked 85.7% to an all-time peak of 91 sen on May 19, from 49 sen on Feb 28. The stock then retreated to 85.5 sen last Friday, down 6.04% from its peak.

The company has plans to develop high-end bungalow units in Pulau Melaka spanning 17.84 acres of reclaimed land opposite the Mahkota Parade shopping mall.

“We are looking at a design concept that is similar to a mini Sentosa. We will look to market it to foreigners, especially Singaporeans,” he said, adding that the project will be developed in various stages as it comprises 92 bungalows.

“We have yet to develop the land. We plan to get all the necessary approvals in place by early-2016 and kick off the development in 2016,” said Tan.

Mitrajaya also owns 180 acres of freehold land in Banting that is targeted for a mixed development by early 2016.  Tan said the Banting land has appreciated to RM12 to RM15 psf from RM3.71 psf.

Its plan over the next three years also includes the development of three blocks of luxury condominiums in Wangsa Maju with a gross development value (GDV) of RM650 million and a mixed development in Puchong Prima with a GDV exceeding RM1 billion.

Besides its operations in Malaysia, it also has a self-sufficient property development business in South Africa which has an undeveloped landbank of 152 acres on which it plans to construct high-density residential units, as well as a business park, shopping mall, office building and hotel.

“South Africa has been profitable to us every year. We believe within the next one to two years, we should have a sizeable amount of cash with us to make additional acquisitions in South Africa without too much borrowings” he said.

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This article first appeared in The Edge Financial Daily, on May 26, 2014.

 

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