4QFY20 CNP of RM27.8m lifted FY20 CNP to RM90m – in line with our and consensus full-year estimates. No dividends as expected. Management guided FY21E replenishment of >RM1.0b – in line with our RM1.2b target. While the current high steel price could pose as earnings risk for Kerjaya, management has indicated of steps to substitute rebars with other materials. On unchanged earnings, we maintain OP with SoP-TP of RM1.50.

Within expectations. 4QFY20 CNP of RM27.8m (+14% QoQ, -33% YoY) brings FY20 CNP to RM90m – within our and consensus forecast at 99%. No dividends as expected.

Highlights. QoQ, 4QFY20 CNP of RM27.8m was up 14% led by a 12% increase in revenue as works progress returned to a normal run-rate (except for two sites which were affected by Covid-19 infection). Unsurprisingly, FY20 CNP was down 40% YoY due to the unprecedented MCO/CMCO lockdowns.

Management introduces FY21E replenishment target of >RM1.0b, in line with our RM1.2b target. Target is backed by a tender-book of RM2b mainly comprising building jobs. Construction order-book remains strong at RM3.5b (3.0x revenue cover).

4Q20 net cash levels remained healthy at RM186m (vs 3QFY20 cash level of RM182m) and there were no receivables anomalies to suggest collection issues at this juncture.

Steel price risks. Kerjaya consumes c.50-60k tonnes of steel per annum. With existing steel prices (rebars) currently hovering at c.RM2,600-2,700/t against FY20 average of RM2,100/t (data obtained from MITI), we noted that construction margins could see compression should the high price (of RM2,700/t) persist till year-end. Our sensitivity indicates that this could impact Kerjaya’s bottom-line by RM9-12m (7- 9% of FY21E estimate). That said, management has plans to reduce the consumption of rebar in exchange for other substituting materials (i.e. BRC, high strength concrete) should the situation persist.

Keep FY21E earnings unchanged and introduce FY22E earnings of RM159m. Our FY21E earnings forecasts has already imputed the suboptimum productivity anticipated for 1HFY21 (due to MCO 2.0).

Maintain OUTPERFORM on unchanged SoP-derived TP of RM1.50. This is anchored by its construction segment of which we have attached a PE multiple of 13x (at 3-year mean) on FY21E earnings. Continue to like KERJAYA for: (i) its strong replenishment prowess, (ii) stable net cash position despite growing top-line, and (iii) trading at an appealing ex-cash FY21E PER of 9x.

Source: Kenanga Research - 26 Feb 2021