Kerjaya announced a RM204m contract win from Gamuda, marking its 4th win YTD, lifting its cumulative wins to RM1.2b against our/management’s FY20E replenishment target of RM1.3b/RM1.5b, respectively. Post win, we increase our conservative replenishment target to RM1.5b, in line with managements’. Consequently, FY21E earnings is increased by 3%. Maintain OP with higher SoP-derived target of RM1.50 (from RM1.45).

New job from Gamuda. Kerjaya announced that they have bagged a RM204m job from Gamuda Land to construct Maya Bay Residence at Gamuda Cove. The development comprises 3 blocks of serviced apartments (972 units) on top of an 8-storey carpark podium which also houses 35 retail lots. The contract spans 27 months with tentative completion in December 2022.

Positive on the win as this marks Kerjaya’s maiden win from Gamuda and its fourth win YTD. Cumulative wins of RM1.2b YTD accounts for 92% of our RM1.3b target and 80% of management’s RM1.5b target. Post win, we increase our conservative FY20E replenishment target higher to RM1.5b (from RM1.3b), in line with managements’ guidance.

Assuming 11% net margin, the contract would contribute RM22.4m to bottom-line over the course of the project, or RM10m/annum for the next 2.3 years.

Outlook. Current outstanding order-book of RM3.6b provides 3x revenue cover. Next year (FY21), Kerjaya would be launching 2 property projects namely Monterez, Shah Alam (GDV: RM250m) and Yakin Land, North Kiara (GDV: RM380m), which will provide an earnings kicker to its profits for the following 3 years.

Post upgrade in replenishment target, FY20E earnings is unchanged but FY21E earnings upped by 3%.

Maintain OUTPERFORM with higher SoP-derived TP of RM1.50 (from RM1.45). This is anchored by its construction segment of which we have attached a PE multiple of 12x (at 3-year mean) on FY21E earnings. We like KERJAYA for: (i) its strong replenishment prowess, (ii) stable net cash position despite growing top-line, and (iii) trading at an appealing ex-cash FY21E PER of 6.9x.

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

Source: Kenanga Research - 2 Sept 2020