• Overview. Kerjaya’s 3Q20 revenue and core earnings slowed down to RM222m (-15.6% yoy) and RM24.5m (-8% yoy) respectively. This brought 9M20 core earnings to RM61.4m (-43.9% yoy). 0n qoq basis, revenue and core earnings recovered swiftly by 73.5% and more than 100%.

• Key highlights. Kerjaya’s margin contraction should not be alarming, as it was weighed by higher opex to comply with MCO related expenses, and not caused by higher construction costs overrun.

• Against estimates: Below. Kerjaya’s 9M20 core earnings of RM61.4m missed our and consensus at 63% and 59% respectively. The key deviation contributed by lower construction segment contribution which only reached full capacity in July.

• Dividend. The company declared 1.5sen dividend, translating into 1.6% yield. We are maintaining 30sen DPS as guidance for full year.

• Outlook. Despite the earnings shortfall, we remain positive on Kerjaya’s earnings visibility which is supported by its RM5.5bn outstanding orderbook. We understand that Kerjaya’s work site is one of the sites that was impacted by Covid-19. Given this situation, we have lowered our FY20 earnings forecast by 8% due to the site closure impacts.

• Maintain our BUY rating with unchanged TP of RM1.30 based on SOP valuation, tagged to 12x PE. We believe Kerjaya’s earnings growth is backed by solid outstanding orderbook backlog of RM5.5bn which will provide earnings visibility for the next 3 years. Maintain BUY

Source: BIMB Securities Research - 27 Nov 2020