Secured New Contract Worth RM256.4mn

KERJAYA has been awarded a new contract worth RM256.4mn from Eastern & Oriental Express Sdn Bhd, an indirect subsidiary company of Eastern & Oriental Bhd (E&O). This contract covers the execution and completion of the proposed development at Shah Alam, Selangor, which entails the following details:

(i) Phase 1 – 6 units of 3-storey terrace houses, clubhouse, TNB substation, landscaping and infrastructure works,

(ii) Phase 2 – 179 units of 3-storey terrace houses, security house and TNB substation, and

(iii) Phase 3 – 175 units 3-storey terrace houses, security house and TNB substation.

This project will begin on 20 January 2025 and is slated for completion within 26 months.

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

Our View

This marks the first construction job clinched by KERJAYA in 2025, bringing its total unbilled order book to approximately RM4.2bn, translating to 2.9x FY23 revenue.

Assuming a 3-year historical net margin of 10%, this project is expected to generate a net profit of c.RM25.6mn throughout the construction period.

Forecast

No changes to our earnings projections as the job win is within our FY25 new job replenishment assumption of RM1.8bn.

Valuation

We maintain our Buy recommendation on the stock with an unchanged target price of RM2.79, based on 18x CY25 EPS 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 - 7 Jan 2025