We are positive on Kerjaya Prospek Group (KPG) future. The company is planning to launch 2 projects namely The Vue @ Monterez and Papyrus North Kiara by 2HFY23. We maintain our FY23 and FY24 earnings forecasts at RM139.2m and RM167.0m respectively attributed to higher revenue recognition. BUY with target price of RM1.76 based on 13x PER (5-years average) over FY24 EPS or a potential upside of more than 60%.

KPG is targeting construction job wins of between RM1.2bn-RM1.5bn for FY23. Presently, the company has a tender book amounting to RM1.5bnRM2.0bn. Year to date, KPG has secured new projects worth more than RM937.8m, bringing its total orderbook to RM4.7bn. KPG has signed a framework agreement with Samsung C&T (KL) SB, a wholly-owned subsidiary of Samsung C&T Corporation (Engineering & Construction Group) (Samsung) in 2002. The JV will pursue various types of business opportunities for construction contracts exceeding RM300m. In October 2022, the Samsung-KPG JV have received a letter of award from Texas Instruments Electronics Malaysia SB worth RM1.45bn for the construction of a factory at Batu Berendam Industrial Park in Melaka Free Trade Zone.

KPG has completed 29 projects with 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. The construction division of KPG is primarily undertaken by its wholly owned subsidiary Kerjaya Prospek SB, which is a Grade 7 contractor registered with the Construction Industry Development Board under Category B, Category CE (Civil Engineering) and Category ME (Mechanical and Electrical).

Labour shortage is expected to be resolved with the admittance of 1,500 foreign workers in 2023 which will raise its workforce to roughly 3,000. In addition, the company has plans to add an additional 1,000 workers, bringing the total workforce to 4,000 workers.

We expect KPG to pay dividend of 8sen and 8.5sen for FY23 and FY24, translating into yields of 7.3% and 7.8% respectively. The company’s balance sheet is strong with net cash of RM260.2m as at 1QFY23. 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 executions; (iii) the ability to consistently winning external jobs; and (iv) solid outstanding orderbook of RM4.7bn.

Source: Rakuten Research - 6 Jul 2023

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