Kerjaya Prospek Group (KPGB) secured a RM404.4m job, marking its second high rise residential building job in FY23. The project is awarded by Ecofirst Consolidated, a Main Market-listed property developer. KPGB’s scope of work involves the construction of two 47-storey towers, comprising 1,700 units of serviced apartments with a GDV of RM1bn. As-to-date, KPGB has successfully replenished RM937.8m or 63% of our FY23 orderbook replenishment assumption of RM1.5bn. Including this job win, current outstanding orderbook increased 4.4% to RM4.7bn. All said, we are leaving our forecasts unchanged as this makes up part of our FY23 orderbook replenishment assumption of RM1.5bn. Nevertheless, the job is expected to contribute c. 5% per annum on average to the Group’s earnings during the contracted period of 36 months, assuming a low teen margin. Our Outperform rating and TP of RM1.70 pegged at 11x PER, below 15x PER sector average, given KPGB’s smaller market capitalisation, is affirmed.

• Job details. The project entails the construction of two blocks of apartment for the proposed development of a 39-storey service apartment, basement and podium, which consists of an 8-storey carpark and commercial unit. The development is strategically situated within 400-metre radius from Damansara Damai MRT station in Chan Sow Lin, Kuala Lumpur. Construction works is currently in the foundation phase, building works is expected to commence in 3QFY23 and will be completed by 3QFY26 (within 36 months).

• Orderbook added 4.4%. The Group’s outstanding order book in hand increased 4.4% to RM4.7bn with the new job win, providing earnings visibility for the next 4 years based on FY22’s construction revenue of RM1.1bn. Assuming a low teen profit margin for this project, we projected it will contribute RM8.45m per annum on average, from FY23-FY26, in net profit based on certain levels of work completion each year. Inclusive of this job win, KPGB has successfully replenished RM937.8m or 63% of our FY23 orderbook replenishment assumption of RM1.5bn. Thus, we make no adjustment to our earnings estimates considering this as part of our FY23 orderbook replenishment assumption.

• Outlook. We believe the Group will continue to clinch internal jobs on the pipeline as well as high-rise and industrial building jobs from the private sector. We anticipate at least, a high-rise residential development and another industrial building job win of RM300-500m in value, through FY23.

Source: PublicInvest Research - 13 Jun 2023