• Kerjaya to jointly develop 36 acres of land in Seberang Perai Tengah, Penang, with construction expected to begin by end24

• This new development will increase Kerjaya’s GDV land bank by two-fold to RM1.6- 1.8bn

• Raise EPS forecasts by 2-8%. Reiterate BUY rating with an unchanged SOP-derived TP of RM2.65

Joint developing 36 acres of land in Penang

Kerjaya Prospek (Kerjaya) has entered into a 55:45 JV with Aspen Vision Development to undertake a mixed development on 36 acres of land in Seberang Perai Tengah, Penang. The master plan includes one affordable housing block, two high-rise residential blocks, and commercial retail shops and offices. The land acquisition cost, estimated at RM156.5m, will be satisfied through RM54.1m cash and RM102.4m in the form of a 338-unit Madani affordable housing block to be delivered to Railway Assets Corporation (RAC). The construction is expected to commence by end24, with completion planned in stages over a 7-year period.

Potential GDV of RM1.5-2bn

The first phase of the development is estimated to have a potential GDV of RM1.5-2bn. With an effective 55% equity stake, this is expected to boost Kerjaya’s GDV by two-fold to RM1.6- 1.8bn, strengthening its property division’s growth prospects. The site’s strategic location near Penang Sentral, which includes a proposed LRT station along the Penang LRT phase 2 alignment and the upcoming Juru-Sungai Dua Elevated Highway, is expected to drive strong demand for residential properties. The funding structure has yet to be finalised. However, we expect Kerjaya’s net cash position to see a reduction to RM78m in 2025E.

Maintain BUY with TP of RM2.65

We lift our 2025-26E earnings forecast by 2-8% after raising our property division's GDV assumption from this JV. We maintain our BUY rating with an unchanged SOP-derived target price of RM2.65. We remain positive on Kerjaya’s earnings prospects, underpinned by its robust contract flows. Key downside risks include lower-than-expected order book replenishment and project margin deterioration.

Source: Philip Capital Research - 12 Nov 2024