Wins RM567.7mn of Reclamation and Dredging Project

KERJAYA has secured a contract worth RM567.7mn from Tanjung Pinang Development Sdn Bhd, a subsidiary of Eastern & Oriental Bhd (E&O). This project covers the reclamation and dredging works for Seri Tanjung Pinang (phase 2B & 2C) development (STP2) Penang, which is located at Tanjung Tokong, Penang.

This project will begin on 1 July 2024 and is slated for completion within 40 months.

It is deemed a recurrent related party transaction as KERJAYA’s nonindependent non-executive chairman, Datuk Tee Eng Ho, is the executive chairman and indirect major shareholder of E&O.

Our View

This marks the sixth construction job bagged by KERJAYA in 2024, lifting the total YTD contract secured to approximately RM978.7mn. This accounts for 61.2% of our FY24 job replenishment assumption of RM1.6bn. We estimate this latest job win will boost KERJAYA’s total outstanding order book to RM4.8bn, translating to 3.2x FY23 revenue.

Based on a 3-year historical net margin of 10%, this project is anticipated to generate a net profit of c.RM56.8mn throughout the construction period.

Forecast

We maintain our earnings forecasts as the job wins are within our FY24 order book replenishment assumption of RM1.6bn.

Valuation

We maintain our target price of RM1.95, premised on 15x CY25 EPS. We place our call under review, pending the release of 1Q24 results on 29 May.

We continue to like KERJAYA for its:- (i) solid earnings visibility, (ii) consistent and robust replenishment of its order book and (iii) the potential growth in industrial property construction leveraging the partnership with Samsung.

Source: TA Research - 28 May 2024