• Kerjaya Prospek’s 9M24 earnings was within both ours and consensus expectations

• We expect sustained earnings momentum in 4Q24, underpinned by its RM4.4bn construction order book and c.RM200m unbilled property sales

• Cut our 2025–26E forecast by 7-9%. Maintain BUY rating and lower our TP to RM2.60

Result in line with expectations; surprised with 4sen special dividend

9M24 core net profit of RM122m (+29% YoY) was based on higher revenue of RM1.2bn (+28% YoY) attributable to better progress billings across its ongoing construction projects and higher contribution from the property development segment. EBITDA margin declined 1.7ppt YoY to 13.6% due to a more significant proportion of revenue from project management contracts, such as the Texas Instrument factory job, which carries a lower project margin. 9M24 results were within our consensus expectations, representing 73% and 74% of full-year forecasts, respectively. Kerjaya declared an interim DPS of 3sen and a special dividend of 4sen in 3Q24, bringing the YTD payout to 12sen, exceeding our initial 10sen DPS assumption.

Stronger sequential earnings

3Q24 revenue rose 28% QoQ to RM505m, mainly attributed to better construction progress billings (+30%), mitigating the weaker property development (-15%). Notwithstanding, EBITDA margin declined 1.2ppts to 12.5% due to higher revenue recognition from lower- margin project management contracts, leading to weaker core net profit growth (+25% QoQ). We expect earnings growth momentum to be strong in 4Q24, supported by its RM4.4bn construction order book, coupled with the progressive recognition of its c.RM200m unbilled sales from ongoing property development projects, including The Vue (c.82% take- up rate) and Papyrus (c.49% take-up).

Maintain BUY with TP of RM2.60

Despite the satisfactory result, we lower our 2025–26E forecasts by 7–9% to better account for the timeline of its Penang JV development, trim 2024 order book replenishment to RM1.6bn (from RM1.8bn), and forecast 12-15sen DPS for 2024-26E. We reiterate our BUY rating with a lower SOP-derived target price of RM2.60. We remain positive about Kerjaya’s earnings prospects, which are supported by the robust contract flows from E&O and KPPROP. Key risks to our BUY call include higher building material prices and lower-than-expected order book replenishment.

Source: Philip Capital Research - 28 Nov 2024