RHB Investment Research Reports

Kerjaya Prospek - More Opportunities Ahead From BBCC; Keep BUY

Publish date: Tue, 18 Apr 2023, 09:51 AM
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An official blog in I3investor to publish research reports provided by RHB Research team.

All materials published here are prepared by RHB Investment Bank Bhd. For latest offers on RHB Invest trading products and news, please refer to: http://www.rhbinvest.com

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  • Keep BUY and MYR1.48 TP, 29% upside and c.4% yield. We visited Kerjaya Prospek’s Bukit Bintang City Centre (BBCC) project site (particularly the serviced residences tower (SR Tower)) and came away feeling upbeat in our outlook as there are still remaining components of the project available. Potential job wins may also come from its partnership with Samsung C&T and the upcoming developments at Seri Tanjung Phase 2. We believe the stock is undervalued – trading at 8.4x FY24F P/E, or -1.5SD from the KLCON Index’s 5-year mean.
  • To date, KPG has won four job awards from BBCC Development totalling >MYR500m between 2018 and 2023, with the latest job award on 30 Jan 2023 worth RM135.4m for the construction of SWNK Houze, a 31- storey serviced apartment. Other related jobs include Lucentia Residences, the Malaysia Grand Bazaar and SR Tower (Figure 1).
  • Building methods for BBCC. During the visit, management highlighted the usage of aluminium formworks and the self-climbing platform. The key attributes of aluminium formworks include a high re-usage value of 230-300 times vs conventional formwork of 50 times with a faster turnaround time of 7 days/floor (Figure 11). Meanwhile, the self-climbing platform has a synchronised climbing mechanism covering 3.5 floors at one time – requiring a one-time installation at the low level and ensures better safety.
  • Outlook. Upcoming jobs under BBCC may come from i) the remaining floors of a residential suite and office tower which may be in the range of MYR50-100m, in our view, ii) an office tower and iii) another serviced residences tower (Figure 2). On further scrutiny, the remaining office tower and the serviced residences tower share the same podium with the group’s ongoing projects – SWNK Houze and the ongoing serviced residences tower, thereby increasing KPG’s chances of winning the remaining jobs.
  • No changes to our FY23F-25F. As such, our SOP-derived TP remains at MYR1.48 after incorporating a 0% ESG premium to our intrinsic value, based on our in-house ESG proprietary scoring. We continue to favour KPG for its lean cost measures facilitated by efficient construction methods as mentioned above – enabling consistent net margins of c.10%.
  • Rerating catalysts. We do not discount the possibility of KPG being involved in overseas jobs as Samsung C&T has a presence in Singapore (for the Cross Island Line) and Indonesia (a power plant project). Furthermore, KPG is eyeing for less sophisticated industrial building jobs such as warehouses on its own. We believe KPG winning the job award for the 80-storey BBCC signature tower will be a positive surprise as IJM Corp (IJM MK, NEUTRAL, TP: MYR1.59) is seen as a frontrunner for the project after completing its first job ie the MYR1.2bn LaLaport shopping mall.
  • Key risks include in a slowdown in the property market, higher raw material cost pressures and lower-than-expected new contract wins.

Source: RHB Research - 18 Apr 2023

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