RHB Investment Research Reports

Kerjaya Prospek - Still Going Strong; Keep BUY

Publish date: Fri, 01 Mar 2024, 10:53 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, with new MYR2.15 TP from MYR1.93, 24% upside. Kerjaya Prospek’s FY23 core profit of MYR130.1m (+13% YoY) met our and Street estimates – making up 98% and 97% of full-year projections. We forecast a 3-year earnings CAGR of 12% backed by its steady job replenishment trend, coupled with stronger property development contribution. FY24F dividend yield of c.5% is also attractive (higher compared to most peers).
  • Results review. The construction segment recorded a PAT of MYR145.7m (+22% YoY) in FY23, backed by higher progress billings from ongoing jobs. Nonetheless, PAT margin for the construction segment slightly dipped to 10.2% in FY23 from 10.6% in FY22 amidst some provision for delays. Meanwhile, the property development segment saw a PAT of MYR4.1m (FY22 loss after tax: MYR0.5m) in FY23, backed by property sales for The Vue @ Monterez project (GDV: c.MYR300m) with a c.60% take-up rate (signed sales and purchase agreement) as of end 4Q23. The property arm is expected to contribute more in FY24 following the launch of Papyrus @ North Kiara project (GDV: c.MYR500m) in 1H24.
  • KPG’s outstanding orderbook as at end 4Q23 stood at c.MYR4.2bn (3x cover ratio). Thus far, KPG has secured MYR377.8m worth of new jobs YTD (25% of our FY24 job replenishment target of MYR1.5bn). The group’s ongoing tenderbook of MYR1.5-2bn still mainly consists of high rise buildings but management indicated that there are around three jobs (particularly industrial) under its partnership with Samsung C&T. Seri Tanjung Pinang Phase 2 (STP2) development in Penang should facilitate KPG’s orderbook replenishment with at least MYR1bn worth of jobs secured under the said development since 2016.
  • Another pocket of opportunity may stem from Eastern & Oriental’s (EAST MK, BUY, MYR1.08) Elmina West development (estimated baseline GDV: MYR1.5bn). Recall that KPG has secured a MYR25m job in 3Q23 to undertake earthworks for the said development in Elmina West. We view this development to be important for EAST to mitigate its single-location risk. Taking these factors into account, we view the stock’s 13.5x FY24F P/E to be undemanding vs the KL Construction Index’s P/E of 17x during the 2017 construction upcycle.
  • No changes to our earnings estimates as results met expectations. We are also introducing our FY26F earnings with a job replenishment target of MYR1.3bn. All in, we revise our SOP-derived TP to MYR2.15 from MYR1.93 after: i) Updating the net cash figures into our SOP valuation, and ii) rolling forward our valuation base year to FY25F (from FY24F). Our TP also bakes in a 2% ESG premium based on an ESG score of 3.1.
  • A major catalyst for KPG includes further involvement in Penang-related projects beyond STP2 in light of the anticipated Penang Light Rail Transit.
  • Downside risks: Property market slowdown and prolonged cost pressures.

Source: RHB Research - 1 Mar 2024

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