Investment Highlights

• We cut our FY18-20F earnings forecasts by 5%, 9% and 17% respectively and decrease our FV by 9% to RM1.71 (from RM1.88) but maintain our HOLD call.

• Our FV is based on 14x revised FY19 EPS, in line with our benchmark forward PE of 13-15x for mid-cap listed construction companies.

• We trim our order book replenishment assumption in FY18-20F to RM700mil annually (from RM1bil). This is to reflect the prolonged slowdown in the property market, particularly the luxury high-rise segment. To recap, Kerjaya Prospek’s niche strength lies in the construction of high-margin luxury condominium projects.

• On a positive note, Kerjaya Prospek has been awarded by BBCC Development Sdn Bhd a 36-month contract for the construction of two service apartment blocks (35- and 47-storey respectively) at Bukit Bintang City Centre (BBCC) for RM357mil.

• This is the first contract Kerjaya Prospek has won in FY18, boosting its outstanding construction order book to RM3.1bil.

• We continue to like Kerjaya Prospek for: 1) its strong earnings visibility underpinned by an order backlog of RM3.1bil; 2) its niche strength in the construction of premium high-rise residential projects; and (3) its proven track record with major blue-chip developers in Malaysia who are its repeat customers.

Source: AmInvest Research - 13 Apr 2018