KERJAYA PROSPEK GROUP BHD

By UOB Kay Hian Research Buy (maintain) Target price: RM1.69

UOB Kay Hian continues to favour Kerjaya for the company’s superior margins, high order book cover, net cash of RM181mil as of end-September 2018, and ability to clinch new contracts, given its strong track record.

Despite the uncertainties in the local construction industry, the brokerage says it has ascribed a higher price-earning multiple for Kerjaya against its peers largely due to the latter’s zero reliance on government-related projects and ability to clinch building jobs in the private sector.

On that note, UOB Kay Hian maintains its “buy” call on Kerjaya, with a target price of RM1.69 based on 14 times the estimated earnings of 12.1 sen per share for financial year ending Dec 31, 2019.

The brokerage notes that the recently secured RM211mil contract from PPB Hartabina Sdn Bhd is fifth job that Kerjaya has won this year. The new contract brings the year-to-date cumulative job wins to RM990mil, in line with UOB Kay Hian’s projection.

“We maintain our job replenishment target of RM1bil in 2019-2020, largely driven by high-rise buildings works in Klang Valley which are estimated to fetch up to RM450mil in 2019,” UOB Kay Hian said.

“Presently, its tender book stands at RM1.6bil, mainly comprising high-rise residential buildings,” it adds.

According to UOB Kay Hian, the contract from PPB, which is or the construction works for a proposed mixed development in Petaling Jaya, could contribute a total of RM21mil in profits for Kerjaya from 2019 to 2021.

“Assuming a 10% net margin, we estimate this project would contribute RM6mil, RM8mil, and RM7mil in net profits in 20192021 respectively,” it says.

With the new job lifting its outstanding order book to about RM3.08bil, Kerjaya now has an order book cover of 3.2 times its 2017 construction revenue.