Kerjaya Prospek Group (KERJAYA - 7161) principally involves in construction of high-end commercial and high-rise residential buildings, property development and manufacturing of lighting and kitchen solutions. The company has an outstanding orderbook amounting RM4.7bn. Presently, KERJAYA has two property development projects with combined GDV of RM630m. Construction on these projects has started with completion expected in 1HFY24. We expect KERJAYA’s FY23 and FY24 earnings to improve by 23.5% and 20.0% to RM139.2m and RM167.0m buoyed by higher revenue recognition. BUY with target price of RM1.70 based on 13x PER (5-years average) over FY24 EPS or a potential upside of more than 50%.

KERJAYA is targeting construction job wins of between RM1.2bnRM1.5bn for FY23. Currently, the company has a tender book amounting to RM2bn. In FY22, KERJAYA has secured total contracts amounting RM1.76bn namely Astrum Ampang (Setia Awan Group), Texas Instruments Electronics Malaysia, Two blocks of apartments housing 454 residential units (KERJAYA), Main building works for two blocks of apartments (Seri Tanjung Pinang E&O) and Main building works for a block of 39 storey apartment (Bangsar Hill Park Development)

Presently, KERJAYA has 36 ongoing projects notably Maya Bay Residences Gamuda Land (T12) SB, VIVO Aspen Vision City SB, Bloomsvale Mixed Commercial Development-KP Property SB, Conlay 491 Patsawan Properties SB and Astrum Ampang Nikmat Merpati SB. The company has an outstanding construction orderbook of RM4.7bn providing earnings visibility over the next 2-3 years.

In October 2022, KERJAYA imported 700 foreign workers, and is planning to bring in another 700 workers over the next 2-3 months, which will raise its workforce to roughly 3,000. Additionally, the company has obtained approval to recruit another 1,000 workers.

Based on historical payout ratio of 20%, we expect KERJAYA to pay dividend of 2.3sen and 2.7sen for FY23 and FY24, translating into yield of 1.9% and 2.3% respectively. The company’s balance sheet is strong with net cash of RM245m as at FY22. Our BUY recommendation is premised on: (i) innovative construction solutions and efficient cost structure that result in above average profit margins; (ii) hands on management team with a proven track record of successful execution; and (iii) the ability to consistently win external jobs.

Source: Rakuten Research - 23 Mar 2023

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