Kumpulan Kitacon Berhad (Kitacon) will be making its debut on Bursa Main Market today. The company principally provide a complete spectrum of services ranging from project management, planning and construction involved in township developments. Kitacon’s financial performance was affected by the implementation of MCO in FY20-FY22. With the ongoing recovery in the local economy, we reckon Kitacon to stage a strong rebound in FY23. We forecast Kitacon to register net earnings of RM45.2m and RM49.4m for FY23 and FY24 respectively, backed by a strong unbilled orderbook of RM853.6m as at 30 November 2022. BUY with a TP of RM0.90 based on 10x PER, 30% discount to Construction Sector PER given its smaller market capitalisation.

Kitacon has an established track record of 32 years in the building construction industry since the commencement of operation in 1990, where it started with various small-scale construction and subcontracting works including renovations and construction of an industrial building. The company is a G7 building construction contractor involved in the construction of residential and nonresidential buildings.

As a main contractor, Kitacon’s responsibilities comprising of project planning and management including submitting and obtaining the necessary approvals and permits such as the temporary building permit by the local authority and where necessary, permit from SPAN covering the infrastructure works (such as sewerage works) within the project area, appointment of subcontractors, procurement of labour and materials, and monitoring the entire building construction process to ensure timely completion up to handover of project to its customers.

Kitacon has numerous ongoing township development namely Bandar Bukit Raja, Bukit Jelutong, City of Elmina and Bandar Universiti Pagoh by Sime Darby Property Group; Tropicana Aman by Tropicana Aman SB; Serene Heights by Symphony Hills SB, just to name a few.

The company is planning to purchase an aluminium formwork system and the construction of a storage and refurbishment facility to house all its aluminium formwork systems, scaffoldings and cabins that are not in use at the construction sites. By having such facilities, Kitacon will be able to perform its work more efficiently while at the same time provide cost savings to the company.

Kitacon is targeting to pay dividend of 25% from its net profit. Based on our estimates, the company is expecting to pay dividend of 2.3sen and 2.5sen per share for FY23 and FY24, translating into yield of 3.3% and 3.6%. Balance sheet is healthy with net cash position pre/post IPO.

Source: Rakuten Research - 17 Jan 2023