Phillip Capital keeps 'buy' on Kerjaya Prospek, ups target price to RM2.60

• In a note on Friday, the research house said Kerjaya’s current outstanding order book stands at RM4.7 billion, after securing RM979 million new contract wins year-to-date, representing 65% of its RM1.5 billion replenishment target for 2024.

KUALA LUMPUR (July 26): Phillip Capital has maintained its 'buy' rating for Kerjaya Prospek Group Bhd (KL:KERJAYA) at RM2.03, with a higher target price of RM2.60 (from RM2), and expects continued robust contract replenishment from Eastern & Oriental Bhd (KL:E&O) and Kerjaya Prospek Property Bhd (KL:KPPROP), with the company actively bidding for RM3 billion worth of data centre and semiconductor related jobs.

In a note on Friday, the research house said Kerjaya’s current outstanding order book stands at RM4.7 billion, after securing RM979 million new contract wins year-to-date, representing 65% of its RM1.5 billion replenishment target for 2024. All projects secured thus far have been awarded by E&O and KPPROP.

“We expect an increase in property revenue contributions in the coming quarters, driven by projects such as The Vue (with a gross development value of RM300 million) and Papyrus (RM500 million).

“The property division is estimated to contribute 10% to 12% of the group’s total revenue across 2024-26 (from 2% in 2023),” the house said.

Phillip Capital said it had tweaked its earnings forecasts for Kerjaya on housekeeping adjustments.

“We reiterate our 'buy' rating, but lift our sum-of-parts-derived target price to RM2.60 (from RM2), after raising our construction segment price-earnings (P/E) multiple to 18 times (from 14 times), or +1 standard deviation construction sector 10-year mean, which is justified by its strong tender book pipeline.

“We believe there is still room for Kerjaya’s valuation to be rerated, as it is currently trading at a forward 14 times P/E, compared to the sector average P/E of 18 times.

“Key downside risks include lower-than-expected order book replenishment, and project margin deterioration,” the house said.

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