Secures RM275.3mn main building contract

KERJAYA has clinched another new contract worth RM275.3mn from Persada Mentari Sdn Bhd, an indirect subsidiary of Eastern & Oriental Bhd (E&O). This contract entails the execution and completion of main building works for the proposed development of a 50-storey serviced apartment in Pulau Andaman, Penang.

This project will commence on 2 January 2025 and is expected to be completed within 38 months.

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

Our View

Following the seventh construction job secured by KERJAYA in 2024, its total YTD new job wins have increased to RM1,254mn. Consequently, this new job will raise KERJAYA’s total outstanding order book to RM4.4bn, translating to 3.0x FY23 revenue.

Based on a 3-year historical net margin of 10%, this project is estimated to generate a net profit of c.RM27.5mn throughout the construction period.

Forecast

No changes to our earnings forecasts, given that this new job win falls within our FY24 order book replenishment assumption of RM1.6bn.

Valuation

We maintain our Buy recommendation on the stock with an unchanged target price of RM2.73, premised on 18x CY25 EPS and 3% ESG premium based on our 4-star rating.

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 - 20 Aug 2024