Investment Highlights

• We maintain our forecast Kerjaya Prospek Group (KPG), but lower our FV to RM1.88 (vs RM4.14) to reflect the recent bonus issuance exercise, on the basis of 6 bonus shares for every 5 existing KPG’s shares. Our FV is based on 14x FY19F EPS, in line with our benchmark forward PE of 13-15x for mid-cap construction listed companies. We maintain our HOLD call.

• KPG’s FY17 core net profit of RM124.5mil met our forecast and consensus estimates.

• The company’s earnings increased 25% YoY underpinned by a stronger performance from: 1. Construction – recognition of its accelerated construction billings coupled with improved net profit margin of 0.5% YoY. 2. Property – improved sales for the year with more sales and purchase agreements were being executed as well as registering higher development progress for the project.

• These were partially offset by the weaker performance of its manufacturing arm which posted a decline of earnings by 64% YoY largely due to completion of an existing project as well margin contraction due to higher cost incurred for new secured projects.

• Meanwhile, we are keeping KPG’s job wins assumption of RM1bil annually FY18-20F respectively.

• We continue to like KPG for: 1) its strong outstanding building contracts order book of RM3.0bil; 2) its 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.

Source: AmInvest Research - 27 Feb 2018