Investment Highlights

• Founded by the Tee brothers, Kerjaya Prospek Group (KPG) specializes in constructing buildings, primarily premium high-rise properties and commercial buildings. It is also engaged in property development as well as manufacturing of lighting and kitchen products (i.e. kitchen cabinets).

• Being a construction player in town in the niche premium high-rise property segment, KPG’s earnings visibility for the upcoming years remains upbeat, underpinned by the following factors:

1. It is a premium building contractor. To date, KPG has completed various iconic building projects across the country with a combined value of RM4bil. KPG is poised to be the contractor of choice for premium highrise properties given its sound track record. Currently, its outstanding order book is valued at RM3.2bil, comprising various types of properties including highrise properties as well commercial buildings. The company is confident of securing additional job wins in FY18 worth at least RM1bil.

2. KPG chalks up above-industry average margins in the construction industry (i.e. in the mid-teens). This is largely due to a lower operating cost achieved by controlling its administration expenses, adopting an industrialized building system coupled with its PPE (property, plant & equipment) that has been fully depreciated.

3. It is well positioned to benefit from the next upcycle in the property market via future launches of its 349 condominium units in Monterez Golf & Country Club, Shah Alam with an estimated GDV of RM200mil. Additionally, KPG plans to launch its commercial property in Genting Permai worth RM30mil.

• We project its FY18/19 earnings to grow 12%/14% underpinned by: 1) strong outstanding building contracts order book of RM3.2bil; 2) strong earnings visibility over upcoming years from the sizeable outstanding order book; and 3) its position as a preferred contractor for premium high-rise residential properties with a proven track record, enabling it to continue bidding for building contracts from existing and potential clients. We initiate coverage on KPG with a HOLD call and FV of RM4.14 based on 14x FY19F EPS, in line with our benchmark forward PE of 13-15x for mid-cap construction listed companies.

Source: AmInvest Research - 5 Jan 2018