9M16 CNP of RM73.8m came in within expectations, accounting for 75% of both our and street’s estimates. No dividend declared as expected. We make no changes to our earnings forecast for FY16-17E. Reiterate OUTPERFORM with an unchanged SoPderived TP of RM2.64.

Within expectations. Kerjaya Prospek Group (KERJAYA)’s 9M16 CNP of RM73.8m is within expectations at 75% of both our and street’s full-year estimates. No dividend declared as expected. We understand the 4.0 sen dividend dished out in August will be the only set of dividend for FY16.

Result Highlights. 3Q16 CNP was up 3.7% QoQ despite revenue dropping 1.6% due to: (i) improved construction contributions (+0.9%) from better construction PAT margins (+0.4ppt), (ii) lower finance cost (-55%) as KERJAYA pared down their borrowings of RM0.3m, and (iii) lower effective tax rate (- 1.2ppt). Balance sheet wise, KERJAYA remains healthy at a net cash level of RM109m (vs. 2Q16 of RM134m) post dividend payout.

YoY comparison is immaterial as we note that order book from KPSB and PBSB amounting to RM1.6b (outstanding) was only injected from January 2016.

Bright outlook ahead. YTD, KERJAYA has secured RM1.5b worth of contracts representing 92% of our targeted replenishment of RM1.6b. As of 9M16, outstanding order book of RM2.89b provides healthy earnings visibility for the next three years. We believe our FY16E replenishment is highly achievable underpinned by their existing tender book of RM1.4b. For FY17, we expect job flows to continue steadily from their existing clientele, i.e. SPSETIA’s Setia Sky Seputeh (RM950m GDV) and E&O’s Puro Place (RM800m GDV).

Maintain FY16-17 earnings. Post results, we make no changes to our FY16-17E earnings estimates of RM98.9-125.9m.

OUTPERFORM with unchanged TP of RM2.64. We continue to like KERJAYA for their conservative approach towards jobs selection – only taking up the job with clients that are good paymaster and making sure jobs secured are within their working capacity. We believe this strategy allows for a sustainable and robust growth towards bottom line in the long run. Hence, we reiterate our OUTPERFORM rating with an unchanged SoPderived TP of RM2.64. Our TP implies 11.8x FY17 PER which is in line with our targeted peers’ range of 9.0-13.0x

Source: Kenanga Research - 28 Nov 2016