KERJAYA has bagged its second contract for this year valued at RM332m for the construction of main building works for a proposed high-rise property development project in Kuala Lumpur. This takes YTD contract wins to RM949m, placing the Group to achieve our full-year order-book replenishment target of RM1.2bn. With an outstanding order-book of RM3.8bn to drive future earnings, BUY with a TP of RM1.50 anchored on its construction business which is valued at FY20E P/E of 10.7x (at 3-year mean).

KERJAYA has accepted a letter of award from Patsawan Properties Sdn Bhd (an indirect joint-venture company of Eastern & Oriental Berhad (E&O) and Mitsui Fudosan Asia Pte Ltd) to carry out the construction of main building works for a proposed property development project consisting of 491-unit serviced apartments located at Jalan Kia Peng, Kuala Lumpur. The job scope for the proposed 54-storey building works will cover: (i) a 10-storey car park with common facilities, and (ii) 44-storey serviced apartments. The contract (with a total value of RM331.95m) shall commence on 20 Jan 2020 and is to be completed within 35 months and 11 days from the commencement date.

The latest contract win comes after the RM617.0m contract from Aspen Vision City that was announced just a week ago. This brings its YTD contract wins to RM949m, putting KERJAYA in a strong position to at least achieve our full- year order-book replenishment assumption of RM1.2bn. Its outstanding construction order-book has risen to RM3.8bn which will underpin earnings visibility for the next 3-4 years.

The deal is regarded to be a related party transaction as Datuk Tee Eng Ho (Datuk Tee) is a director of E&O while Datuk Tee & family are substantial shareholders of E&O (holding a 13.9% stake in E&O). Datuk Tee & family are also the major shareholders of KERJAYA with a combined interest of 70.8%.

Source: Rakuten Research - 21 Jan 2020