KERJAYA kicked off 2020 by securing contracts collectively valued at RM617m to undertake piling and main building works for a mixed property development project in Penang. These contracts represent approximately half of our forecast full-year contract wins of RM1.2b and lift its outstanding order-book to RM3.5b. Maintain OUTPERFORM with unchanged SoP-derived TP of RM1.50.

First contract win in 2020. KERJAYA has secured contracts from Aspen Vision City to carry out piling, pile cap works and main building works for a proposed residential and commercial development project situated within Aspen Vision City in Seberang Perai Selatan, Penang. The total contract value of RM617.0m is divided into two phases namely: (a) Phase 1, which is valued at RM365m involving the development of 1,530 units of apartments, 14 units of shops, car parking podium and common facilities with construction works to take 38 months starting from Feb 2020, and (b) Phase 2, which is valued at RM252m involving the development of 980 units of apartments, 9 units of shops, car parking podium and common facilities to be completed within 36 months from a commencement date to be determined later.

Order-book boost. By clinching these contracts at the beginning of the year, KERJAYA is on track to at least achieve our full-year contract wins target of RM1.2b (which is similar to 2019 total contract wins value of RM1.2b). No change to our earnings forecasts. Following these latest contract wins, its outstanding construction order-book has jumped to RM3.5b which will underpin earnings visibility for the next 3-4 years.

Maintain OUTPERFORM. Our SoP-derived target price is unchanged at RM1.50. This is anchored by its construction business which is valued at CY20 P/E of 10.7x (at 3-year mean) (please refer to SoP table overleaf).

Risks to our call include: (i) lower-than-expected job wins, (ii) delay in construction progress, and (iii) lower construction margins.

Source: Kenanga Research - 14 Jan 2020