• 4Q18 core earnings grew 4.8% qoq and 19.0% yoy on higher property segment contribution and better margins achieved for the construction segment.

• Meanwhile, 2018 core earnings advanced 12.6% with revenue exceeding the RM1bn mark, an 11.8% growth, on higher progress billings and property sales.

• We stay positive on its earnings growth outlook backed by outstanding orderbook worth RM3.0bn albeit depleting property inventory.

• Maintain BUY with RM1.40 TP. We like the stock for its net cash position, sustainable 3-year earnings visibility and steady job flows from a diverse client pool of high-rise property developers.

Solid quarterly earnings

Kerjaya Prospek posted a solid 4Q18 core earnings growth of 4.8% and 19.0% over qoq and yoy period respectively. The growth was driven by higher property development contribution following completion of the Vista Residence. Earnings growth was also aided by the construction segment which recorded better margins; net margin expanded to 12.9% (3Q18: 10.6%, 4Q17: 12.3%).

2018 revenue exceeded RM1bn mark

2018 revenue exceeded the RM1bn mark, to RM1.07bn, representing an 11.8% increase mainly due to 10.7% higher progress billings albeit margin narrowed slightly to 11.9% (2017: 13.3%). Meanwhile, property sales grew 31.7% on higher development progress and excellent take up rates for the Vista Residence. Overall, it continues to hold superior core earnings margin at 13.6% and posted a strong growth of 12.6%.

Earnings remain positive despite depleting property inventory

Excluding c.RM30m commercial units for Vista Residence, we were made to understand that the residential units have secured full SPA sign up. As such, the remaining of RM56.7 unbilled sales are expected to be recognised in 1H19. In view of depleting property inventory, we expect the construction segment to drive earnings growth on the back of RM3.02bn of outstanding orderbook, providing a 3-year earnings visibility. We expect the property segment to pick up in 2H19 upon launching of the Yakin Land and Monterez golf club projects.

Maintain BUY with TP of RM1.40

We maintain our BUY call and TP of RM1.40. Despite facing a sluggish construction sector and soft property market, KP continues to deliver and outdo its peers. Furthermore, the stock boasts solid fundamentals with strong net cash position, outstanding orderbook with a 3-year earnings visibility and steady job flow from its diverse client pool.

Source: BIMB Securities Research - 1 Mar 2019