KERJAYA has been awarded a RM125m high-rise building job in Selangor by UEMS, raising its YTD job wins to RM1.4b and outstanding order book to RM4.5b. We continue to like KERJAYA for its innovative and hence high-margin formwork construction method. We maintain our forecasts, TP of RM1.53 and OUTPERFORM call.

KERJAYA has been awarded a RM125.0m building job by UEMS (Not Rated) for two apartment blocks of 25 and 26 storeys respectively, a 3- storey commercial unit and a podium with a 6-storey carpark and common area in Taman Equine, Bandar Putra Permai, Selangor. The job will commence in Sept 2023 with a contract period of 29 months.

We are positive on this win which brings its YTD total orderbook secured to RM1.4b (RM1.1b new wins and RM300m variation orders) or 93% of our FY23 job replenishment assumption of RM1.5b. KERJAYA has a full-year job win target of RM1.2b. The latest job win has also boosted its outstanding order book to RM4.5b. We expect the contract to fetch a PAT margin of 10%.

Meanwhile, its tender book stands at c.RM1.5b−RM2.0b currently, comprising: (i) building/reclamation jobs from its sister companies i.e., E&O and KPPROP, (ii) MNC industrial warehouse/factories (via its JV with Samsung C&T), and (iii) third-party building jobs in the Klang Valley.

Forecasts. Maintained.

We also keep our SoP-TP of RM1.53 (see next page), valuing its construction business at 13x forward PER, at a discount to 14x-18x we ascribed to mid-sized and large contractors (i.e., GAMUDA, IJM and SUNCON) given KERJAYA’s focus in on the high-rise building sector currently weighed down by an oversupply in the office and residential segments. There is no adjustment to our TP based on ESG given a 3- star ESG rating as appraised by us (see Page 4).

We continue to like KERJAYA for: (i) its innovative and hence highmargin formwork construction method, (ii) its lean and hands-on management team with a strong execution rack record, (iii) its strong earnings visibility underpinned by a sizeable outstanding order book and recurring orders from related companies (E&O, KPPROP). Maintain OUTPERFORM.

Risks to our call include: (i) further deterioration in the prospects for building jobs, (ii) rising input costs, and (iii) project cost overrun and liabilities arising from liquidated ascertained damages (LAD).

Source: Kenanga Research - 1 Sept 2023