• Overview. Kerjaya’s 1Q20 core net profit fell 14.3% yoy on the back of lower revenue by 19.8% yoy weighed by all segments contribution. On qoq basis, core net profit dropped by 38.6% qoq due to the similar reason mentioned.
• Key highlights. Despite the fall in core net profit, we are positive on Kerjaya’s net cash flow during the period. This reflects the group efficiency in collection methods.
• Against estimates: Below. Kerjaya’s 3MFY20 core net profit of RM25.4m came in behind both our and consensus’ forecast at 16% and 18% respectively. The key setback was mainly from the impact of 2 weeks of MCO period, resulting in construction revenue falling 14.3% yoy while property development revenue declined to zero against RM17m during 1QFY19.
• Outlook. Kerjaya hinted the upcoming 2Q20 results will not be as bad as we initially thought. Kerjaya explained that it had started works after receiving clearance from government during the MCO period albeit at slower pace. In addition, operation resumes at 60% capacity since early June and run at 90% end-June. YTD, Kerjaya bagged RM990m worth of jobs and seems positive to secure another RM500m-600m of contracts, contributed by external and internal jobs. A such we lower our earnings assumption target for FY20 by 28% and FY21 by 6.8% to reflect the slow construction and property activities. We also introduces FY22 assumptions and forecast in this report.
• Post-earnings adjustment and rolling our valuation into FY21, we derived at a new TP of RM1.32 (from RM1.46 previously) based on SOP valuations, tagged to 12x PE. We believe Kerjaya’s earnings growth is backed by solid outstanding orderbook backlog of RM3.7b which will provide earnings visibility for the next 2-3years. Maintain BUY.

Source: BIMB Securities Research - 1 Jul 2020