Kerjaya’s 49%-owned associate has secured a RM153.5m contract in BBCC (Bukit Bintang City Centre) to undertake the construction a 44-storey serviced apartment tower and its foundation. Contract win is within our FY21E replenishment target of RM1.2b. Positive on the win as outstanding order-book is lifted to RM3.4b (3x cover). Post the win, we maintain our earnings estimates but lift TP to RM1.75 (from RM1.50) after rolling valuation base year forward to FY22E. Reiterate OP.

First contract win in 2021. Kerjaya through its 49%-owned associate Kerjaya Bina BMK S/B has won a RM153.5m contract from BBCC Development S/B to undertake construction works for a mixed development project encompassing: (i) a 44-storey serviced apartment, (ii) a podium block with 8-storey car park, and (iii) a 7-level car park comprising 3 underground and 4 basement levels. This contract will take 30 months to complete starting from 15 April 2021.

Positive on the win. Kerjaya’s effective stake win of RM75m from this job is within our FY21E replenishment target of RM1.2b (management’s guidance: >RM1.0b). Post win, outstanding order-book is lifted to RM3.4b (c.3x cover).

BBCC’s remaining high-rise components comprise: (i) 2 residential towers, (ii) 1 office block and (iii) the 80-storey BBCC signature tower (refer back for infographic). We believe Kerjaya stands a good chance in securing the two remaining residential towers and office block as these developments share the same podium with (i) Kerjaya’s new job and (ii) Lucentia Residence (Kerjaya’s on-going residential project secured in 2018). We believe these three remaining jobs have a contract quantum of c.RM600-700m.

As for the BBCC signature tower which would house offices, service residences and a 5-star hotel (final phase of BBCC project); we think IJM (OP; TP: RM2.20) is the favourite to secure this tower contract as they are the current contractor building the Lalaport Lifestyle Mall (contract worth RM1.16b secured in 2017) located right beside the BBCC signature tower. We expect the BBCC signature towers’ contract value to be north of RM500m and should Kerjaya win it, would be an upside surprise. That said, this contract is not expected to be dished out anytime in the near future.

Maintain FY21/22E earnings post award.

Reiterate OUTPERFORM on higher SoP-derived TP of RM1.75 after rolling valuation base year forward to FY22E. We continue to like the name for its (i) execution prowess and (ii) earnings growth moving forward underpinned by the pick-up in construction works post pandemic and its two new development projects (Monterez and Yakin Land with combined GDV of RM630m) which will be launched in 2HCY21.

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

Source: Kenanga Research - 12 Apr 2021