• Keep BUY and MYR2.67 TP, 16% upside with 5% yield. Kerjaya Prospek has announced its first job win for FY25. The MYR256.4m contract which was awarded by an indirect subsidiary of Eastern & Oriental (EAST MK, BUY, TP: MYR1.38), to execute and complete building contract works for the proposed development in Elmina West, Section U16, Shah Alam. The contract covers three phases comprising 360 units of 3-storey terrace houses alongside a clubhouse, landscaping works and related infrastructure.
• This project is not the first job secured by KPG in relation to EAST's Elmina West development. The group clinched a MYR25m contract in 3Q23 to undertake earthworks in the said development. In fact, EAST's land in Elmina West spans 66 acres and is strategically located near the 17.2-acre Elmina Lakeside Mall. We expect the net margin for this latest contract in Elmina West to be 9-10%. Works should commence in late January, and are expected to be completed in 26 months. Looking ahead, other opportunities that may arise from Elmina West include the launch of a project of over 110 shophouses by EAST in FY26 (Figure 1).
• Post new job win, KPG's latest construction orderbook now stands at around MYR4.2bn (2.9x cover ratio). Meanwhile, KPG has tenders worth MYR3-4bn, with about MYR1.5bn related to a data centre and logistics warehouse jobs.
• Medium to near-term opportunities. Penang still has ample opportunities - such as dredging and land reclamation works for Phases 2B and 2C of Seri Tanjung Pinang Phase 2 (STP2, GDV: MYR60bn) which could be in excess of MYR500m, combined with upcoming launches with a GDV of >MYR500m in total for STP in the next six months. All in, we view the stock's FY25F P/E of 15x to be undemanding vs the Bursa Malaysia Construction Index's forward P/E of 18x. Our upbeat outlook is reflected in our forecasted 3-year (FY23-FY26) earnings CAGR of 14%, backed by steady job flows from Penang and the Klang Valley, coupled with stronger property development contributions.
• No changes in earnings estimates as the latest job win is within our FY25F job replenishment assumption of MYR1.6bn. As such, our SOP-derived TP of MYR2.67 (with a 2% ESG premium baked in) is unchanged. A rerating catalyst would be an earlier-than-expected win for new industrial jobs (such as data centres) in 1H25.
• Downside risks: Property market slowdown and prolonged cost pressures.

Source: RHB Research - 7 Jan 2025