Kerjaya’s new building project win garners neutral views
KUCHING: Kerjaya Prospek Group Bhd’s (Kerjaya) new building project win has garnered neutral views from analysts despite the group’s year to date wins (YTD) now surpassing targets.
In a joint press release, it was announced that Kerjaya’s wholly-owned subsidiary Kerjaya Prospek (M) Sdn Bhd (Kerjaya Prospek) has been appointed by Bon Estates Sdn Bhd (Bon Estates) as the main contractor for its popular “The Estate” luxury project in South Bangsar.
“Signing the deal worth RM291 million today at Bon Estates Office in Bangsar, it brings the total outstanding orderbook of Kerjaya Prospek to RM3.15 billion.
“This project marks Kerjaya Prospek’s seventh contract award for the year and brings the year-to-date contract wins to RM1.16 billion,” the statement read.
Despite Kerjaya’s YTD wins surpassing its RM1.1 billion financial year 2017 estimate (FY17E) replenishment target, the reseach arm of Kenanga Investment Bank Bhd (Kenanga Research) remained neutral given that it was only slightly above its target, accounting for 104 per cent of full-year target.
“Also, note that we are entering the tail-end of FY17 and this contract is still within our FY18E replenishment target of RM1.2 billion,” Kenanga Research said.
However, should Kerjaya clinch another major contract with value exceeding RM200 million by year-end, the research arm would look to adjust its FY18E replenishment assumption upwards.
It noted that assuming pre-tax margin assumption of 16 per cent, this newly won contract will contribute circa RM13.1 million to Kerjaya’s bottom-line per annum.
Kenanga Research highlighted that as Kerjaya’s outstanding order-book currently stands at RM3.15 billion, this gives them a visibility of circa 2.5 years.
Meanwhile, the group’s tender-book stands at circa RM0.9 billion and Kenanga Research believed further project wins could likely stem from Dato’s Tee’s (Kerjaya’s major shareholder) private property arm.
The research arm noted that the private property arm is planning to launch a mixed development project in Old Klang Road with a gross development value (GDV) of RM1 billion, leading to circa RM300-400 million worth of contracts to be dished out which would likely happen in FY18.
Besides that, the research arm believed Kerjaya could possibly undertake a onefor-one bonus issue.
This is because the Companies Act 2016 states that share premium account will no longer be applicable from FY18 onwards and Kerjaya has a high share premium of RM333 million versus share capital of RM258 million as of the second quarter of 2017 (2Q17), it noted.
Post award, there were no changes made to Kenanga Research’s FY17 and FY18E earnings of RM126.7 million to RM148.1 million.
Nonetheless, Kenanga Research noted that should Kerjaya secure another major contract exceeding RM200 million, the research arm will look to upgrade its FY18E replenishment of RM1.2 billion to RM1.4 billion which would increase FY18E core net profit (CNP) by 5.5 per cent to RM156 million.
All in, Kenanga Research maintained its sum of parts (SoP)-derived target price of RM3.30 per share and reiterated its ‘underperform’ call on Kerjaya.