Results Review

• Stripping out an exceptional net loss amounting to RM0.9mn, KERJAYA’s 9MFY23 core profit of RM97.5mn came in at 67.6% and 69.1% of ours and consensus’ full-year estimate, respectively. We deem the results to be within expectation as we expect the group to deliver stronger earnings in the final quarter due to higher work progress.

• A third interim dividend of 2.0sen/share was declared, bringing YTD dividend to 6.0sen/share. (9MFY22: 4.0sen/share)

• YoY, 9MFY23 core profit increased 10.0% to RM97.5mn as revenue was 15.8% higher at RM968.7mn. The stronger earnings performance was mainly due to higher work progress as well as better performance from the property development segment, thanks to the higher contribution from The Vue @ Monterez project.

• QoQ, 3QFY23 core profit surged 7.1% to RM35.8mn while revenue was 17.1% higher at RM362.2mn. The stronger bottom line was mainly thanks to higher progress of construction works activities.

• Separately, the group had received the notice from BCM Holdings Sdn Bhd (BCM) that BCM decided not to proceed with the RM404.4mn residential building job in Kuala Lumpur. Recap, KERJAYA won the job back in June 2023. Briefing Highlights:

• The management has set a construction order book replenishment target of at least RM1.5bn for FY24. The total year-to-date contract win is about RM1.2bn.

• Based on management’s guidance, the group will see a more meaningful contribution from the property segment next year, as the group plans to launch the Papyrus North Kiara project, with an estimated GDV of around RM500.0mn in 1Q2024.

• Pertaining to the notice from BCM, management guided that the physical work has yet to commence. The group will take the necessary steps to enforce its right to recover the pre-agreed damages payable according to the Letter of Award.

Impact

• Following the notice from BCM, we take a conservative stance by removing the whole contract value from the current outstanding order book. Consequently, earnings forecasts for FY23/FY24/FY25 are reduced by 3.3%/3.6%/7.0%, respectively.

Outlook

• The group’s current outstanding construction order book is around RM4.3bn, translating to about 3.8xFY22 revenue. Meanwhile, the group has an active tender book of up to RM2.0bn.

Valuation

• After revising the earnings forecasts, we tweaked the target price from RM1.57 to RM1.52 based on unchanged 12xCY24 earnings. Maintain Hold call on KERJAYA.

Source: TA Research - 22 Nov 2023