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Author: kltrader   |   Latest post: Mon, 10 Feb 2020, 4:26 PM

 

Kerjaya Prospek - Acing the orderbook

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  • Kerjaya Prospek secured a new contact worth RM227.3m for 2 blocks of the Axon Bukit Bintang development. This could add c.RM8.4m net profit p.a. up to 2022, we estimate.
  • The total jobs wins for 2019 now amounts to RM1.15bn and exceeded our RM1bn assumption.
  • We raise our 2019F-21F estimates by 5%-12% on higher orderbook target of RM1.5bn for 2019 though we lower our margin assumptions to reflect potential input cost hikes in coming years.
  • Upgrade to BUY with higher RM1.46 TP. Its fundamental remains intact with net cash position and 3-year earnings visbility. Accumulate on dips.

RM227.3m for Axon Bukit Bintang

Kerjaya Prospek secured its fourth construction job in 2019 worth RM227.3m from Enduring Power for development of the Axon Bukit Bintang service apartments by Aset Kayamas. The project consists of 1 block of 27-storey apartment and 1 block of 34-storey apartments on top of a 9-storey car park. We estimate the project would deliver c.RM8.4m net profit per annum over the 3-year construction period based on 11.1% net margin assumption.

Exceeded assumption with excellent outstanding orderbook

This project raises total orderbook secured in 2019 to RM1.15bn, exceeding our RM1bn assumption. It also enhances the current outstanding orderbook to RM3.5bn, providing a 3-year earnings visibility. Raised estimates for 2019F-2021F We raise 2019F/20F/21F estimates accordingly by 5%/8%/12% on higher orderbook assumption; for 2019 we expect job wins to hit RM1.5bn and sustain at RM1.2bn p.a. over 2020 and 2021 by capitalising on its high rise development expertise. Despite the reversal in cement price hike, we believe this is temporary with possible gradual increase in coming years. Hence, we assume a more conservative margin assumptions for 2020/21 (Table 2). Still, we expect Kerjaya Prospek to sustain its strong double digit net margins for 2020F-21F.

Upgrade to BUY with higher TP of RM1.46

Upgrade to BUY (from HOLD) with RM1.46 SOP-derived TP (from RM1.35) after we roll forward valuation to 2020F EPS at 11x PE multiple. We continue to like the stock for its solid fundamentals underpinned by its net cash position, 3-year earnings visibility and diverse client pool.

Source: BIMB Securities Research - 21 Jun 2019

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