FY19 CNP of RM150.7m (+4% YoY) is within expectations, coming in at 98%/105% of our/consensus full-year estimates. Forward earnings will be driven by outstanding order-book of RM2.92b and new contract wins assumption of RM1.35b this year. Still an OUTPERFORM with unchanged SoP-derived TP of RM1.50.

Met expectations. FY19 CNP of RM150.7m (+4% YoY) accounted for 98%/105% of our/consensus full-year estimates. The marginally better YoY performance was driven mainly by the construction division, which contributed net profit (before elimination) of RM122.0m (+3.9%) on the back of turnover of RM1.0b (+4%) as net margin stood unchanged at 12.1%. This offset the lower net profit (before elimination) contribution of RM8.6m (-56%) from the property division for the full-year.

Results’ highlight. 4QFY19 CNP of RM41.3m (+1% QoQ/+2% YoY) mirrored the broadly flat performance of its construction segment in the final quarter. The Company, which has paid an interim DPS of 1.5 sen in Jan 2019, did not declare dividends in the latest quarter. For FY18, Kerjaya only proposed a final DPS of 2.0 sen in Apr 2019 which was paid out in Jul 2019. This suggests a final dividend may be declared for FY19 in the coming months. The Group is in a net cash position of RM210m (or 17.0 sen per share) as of end-Dec last year.

Strong earnings visibility. Forward earnings will be driven by construction order-book of RM2.92b (as of Dec 2019). After securing new contract wins of RM1.22b last year, we are assuming Kerjaya to achieve an order-book replenishment of RM1.35b this year. YTD, it has already secured contracts valued at RM990m, lifting outstanding order book to RM3.9b or 3.9 times its FY19 construction revenue.

Raising earnings forecasts. Post results, we have upped our net profit forecast to RM170m (+8%) for FY20 and introduced net profit of RM205m for FY21. This is to mainly take into account higher order book of construction jobs.

Still an OUTPERFORM with a SoP-derived Target Price of RM1.50.

This is anchored by its construction segment which we have attached at P/E multiple of 10.7x (at 3-year mean) for its CY20 earnings (please refer to SoP table overleaf).

Risks to our call include: lower-than-expected job wins, delay in construction progress and lower construction margins

Source: Kenanga Research - 27 Feb 2020