Kerjaya Prospek Group (KPGB) 1QFY23 core PATAMI improved marginally at 4.7% QoQ mainly due to the performance of its core division, construction which reported 3.3% topline growth QoQ attributed to higher construction works done in the quarter. The Group’s 1QFY23 core net profit however, is faintly below ours and consensus  estimates, accounting for 19.2% and 19.4% respectively. However, we maintain our  forecast and TP for now as we anticipate earnings to pick up in the coming quarters  owing to higher construction progress billings, on top of two property launches – The Vue @ Monterez & Yakin Land development, in 2HFY23. All said, we retain our  Outperform rating with an unchanged sum-of-parts TP of RM1.70, or implied 11x  PER, below than 15x PER sector average, given KPGB’s smaller size.

• Marginal topline growth. The Group reported marginal revenue improvement of +3% QoQ, supported by higher construction billings. The construction  division recorded flattish (+3.3% QoQ) revenue growth although overall  construction work efficiency has normalized as more workers returned to  construction sites but impacted by shorter work days due to Chinese New Year  holidays during the quarter.

• Flattish core earnings QoQ. Core earnings enhanced by 4.7% QoQ attributed  to lower financing cost (-37.7% QoQ) and tax rate (-4.4% QoQ). We expect the  property division to start contributing meaningfully in 2HFY23 onwards, upon  launching of the abovementioned property projects.

• Outlook. We anticipate earnings to pick up in the coming quarters as a result  of higher construction progress billings, on top of two property launches with a  combined GDV of RM630m – The Vue @ Monterez & Yakin Land development,  in 2HFY23. On jobs flow, we believe the Group will continue to bag internal jobs  on the pipeline as well as high-rise and industrial building jobs from the private  sector in 2HFY23. To note, KPGB’s current orderbook of RM4.5bn provides  earnings visibility of 3 years based on FY22’s construction revenue of RM1.1bn.  YTD orderbook replenishment stood at RM533.4m, accounting for 35.6% of our  FY23 orderbook replenishment assumption of RM1.5bn.

Source: PublicInvest Research - 24 May 2023