Results Review

• Stripping out an exceptional net loss amounting to RM0.7mn, KERJAYA’s 1HFY23 core profit of RM61.7mn came in at 43.7% and 41.9% of ours and consensus’ full-year estimate, respectively. We deem the results to be within expectation as we expect the group to deliver a stronger earnings performance in 2H2023 due to higher work progress following the arrival of the final batch of foreign workers.

• A second interim dividend of 2.0sen/share was declared, bringing YTD dividend to 4.0sen/share. (1HFY22: 3.0sen/share)

• YoY, 1HFY23 core profit increased 6.0% to RM61.7mn as revenue was 5.0% higher at RM606.5mn. The stronger earnings performance was mainly due to higher progress billings in tandem with the increased site activities.

• QoQ, 2QFY23 core profit surged 18.1% to RM33.4mn while revenue was 4.0% higher at RM309.3mn. The stronger bottom line was mainly thanks to higher progress of construction works activities.

Briefing Highlights:

• The management has maintained its construction order book replenishment target of at least RM1.2bn for FY23. The total year-to-date contract win is about RM983.8mn.

• The management guided that foreign workers shortage is no longer a major concern given that the group finally has sufficient workers to operate at full force.

• Pertaining to the joint venture between KERJAYA and Samsung C&T, management revealed that the contract value for the construction of electrical and electronics factory in Melaka has further increased from RM1.5bn to more than RM2.0bn due to additional work scopes.

• The group targets to launch one property project namely Papyrus North Kiara, with an estimated GDV of around RM500.0mn in 2H2023.

• Based on management’s guidance, the dividend payout for FY23 is likely to be better than the previous year.

Impact

• Maintain FY23 to FY25 earnings forecasts. We take this opportunity to raise our assumption of annual dividend payment for FY23 from 6.0sen/share to 8.0sen/share.

Outlook

• As of end-June 2023, the group’s outstanding construction order book stood at RM4.5bn, translating to about 4.0xFY22 revenue. Of the RM4.5bn outstanding order book, 44.4% is from related party transactions. Meanwhile, the group has an active tender book of up to RM2.0bn.

Valuation

• No change to our target price of RM1.50, based on unchanged 12x CY24 earnings. Maintain Buy on KERJAYA.

Source: TA Research - 21 Aug 2023