Yesterday, KERJAYA announced that they had secured a RM77.0m commercial building project from TSM Tower S/B at Mutiara Damansara, Selangor. We are NEUTRAL on the award given that YTD wins of RM316 is still within our FY17E replenishment target of RM1.6b. Maintain our FY17-18E earnings forecasts. Post award, we maintain KERJAYA’s MARKET PERFORM call with unchanged TP of RM3.10.

New building contract. Yesterday, KERJAYA announced that they had secured a project worth RM77.0m from TSM Tower S/B (subsidiary of West River Capital S/B). The scope of job comprises main building works for a 24-storey commercial office building and its associated ancillary works at Mutiara Damansara, Selangor slated for completion by 4Q18 (15 months duration).

Neutral on the award. We are NEUTRAL on the award given that KERJAYA’s YTD wins of RM316m is still within our FY17E replenishment target of RM1.6b; making up 20% of our replenishment target with a remainder of RM1.3b to be achieved for the rest of year. We note that this is the third award win KERJAYA has secured for FY17. Assuming PBT margins of 14%, this newly secured project is expected to contribute c.RM6.5m to KERJAYA’s bottom-line per annum.

Company outlook. Post-award, KERJAYA’s outstanding orderbook stands at c.RM2.6b providing healthy earnings visibility for the next 2.0-2.5 years. We believe KERJAYA is set to achieve our replenishment target of RM1.6b mainly backed by projects from E&O, SPSETIA and Dato Tee’s (major shareholder of KERJAYA) private property arm.

Maintain FY17-18E earnings. Post award, we make no changes to our FY17-18E CNP of RM125.9m-RM146.3m.

Maintain MARKET PERFORM with an unchanged SoPderived TP of RM3.10. Our TP implies 12.0x FY18 PER in line with our targeted peers’ range of 9.0-13.0x. We note that while our valuation is at the higher end of our targeted range, we deem it fair considering that KERJAYA’s net margins of c.11% remain superior over peers’ (MITRA, HSL, KIMLUN) average of 9%. Risks to our call include: (i) lower-than-expected replenishment and margins, (ii) delays in construction works.

Source: Kenanga Research - 24 May 2017