TA Sector Research

Kerjaya Prospek Group Berhad - Stronger 2H Ahead

sectoranalyst
Publish date: Wed, 28 Aug 2024, 01:12 PM

Results Review

  • Stripping off the extraordinary item totalling RM4.3mn, KERJAYA’s 1HFY24 results came in within ours but fell short of consensus forecasts. The core net profit of RM75.0mn accounted for 45.2% and 43.8% of ours and the street’s full-year estimates, respectively.
  • A second interim dividend of 2.5sen/share was declared, bringing the YTD dividend to 5.0sen/share (1HFY23: 4.0sen/share).
  • KERJAYA’s 1HFY24 recorded a substantial revenue and core net profit growth of 20.8% and 21.5% YoY, respectively. This growth was largely driven by higher revenue recognition due to increased construction activities.
  • QoQ, 1QFY24 revenue increased by 17.3%, attributed to the same reason abovementioned. However, net profit growth was slower at 3.2% due to higher operating costs, which were partly driven by the diesel subsidy rationalisation. Briefing Highlights:
  • KERJAYA anticipates stronger earnings in 2HFY24, driven by accelerated construction progress and the completion of certain tail-end projects. The group remains optimistic about achieving its RM1.6bn new job replenishment target, having already secured RM1.3bn in new jobs YTD.
  • The company is preparing for pre-qualification assessment before submitting tenders for data centre and industrial building projects for global clients. The potential tender value is around RM2.2bn, with the results expected to be announced by 1HFY25.
  • Management anticipates a more significant contribution from the property development segment next year. The Vue @ Monterez (GDV: RM300mn) reported a take-up rate of 70% as of the end of June 2024. Meanwhile, Papyrus @ North Kiara (GDV:RM500mn), which was recently softlaunched in Mar has achieved a take-up rate of 40%.

Impact

  • Maintain our FY24-26F earnings forecasts.

Outlook

  • With an outstanding construction order book of RM4.4bn, equivalent to 3.0x FY23 revenue, we expect robust earnings visibility over the next three years. Excluding data centres and industrial-related projects, the group’s active tender book for various high-rise building projects, with a combined value of RM1.5bn to RM2.0bn, offers additional growth potential.

Valuation

  • We reiterate our Buy call on the stock and TP of RM2.73, based on PER 18x CY25 earnings and 3% ESG premium given 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 - 28 Aug 2024

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