Kerjaya Prospek Group (KPGB) successfully clinched an infrastructure job from its interested related-party, Eastern & Oriental, for the construction of coastal protection structure worth RM398m. With this new job win, KPGB’s outstanding orderbook jumped by 9.3% to RM4.7bn. Year-to-date, FY23 jobs replenishment amounted to RM533.4m which makes up 53.3% of our conservative RM1bn orderbook replenishment assumption. Nevertheless, we are leaving our forecasts unchanged pending the release of its 4QFY22 results on Feb 24. Assuming a 10% profit margin, the job is expected to contribute 7.2% to the Group during the contracted period of 36 months. Our Outperform rating and TP of RM1.69 is affirmed.

• Job details. The job covers construction of coastal protection structure for Seri Tanjung Pinang (Phase 2B & 2C) Development (STP2) Penang situated at Tanjung Tokong, Pulau Pinang. Construction shall begin in 1QFY23 and will be completed by 1QFY26 (within 36 months). The job is worth RM398m.
  We understand that there was about RM2bn worth of infrastructure works from STP2 project, targeted for completion by c.2026. Excluding reclamation works which is approx. RM1bn, we think KPGB will continue to benefit from the remaining RM1bn infrastructure works.

• Orderbook replenished by 6.5%. The Group’s outstanding order book in hand rose 6.5% to RM4.7bn with the new job win, providing earnings visibility for the next 4-5 years based on FY22’s construction revenue of RM976.6m. Assuming a 10% profit margin for this project, it will contribute c. RM39.8m net profit during the contracted period of 36 months. We make no adjustment to our earnings estimates pending the release of its 4QFY22 results on Feb 24.

Source: PublicInvest Research - 8 Feb 2023