Results Review

• Excluding one-off expenses totaling RM5.6mn, KERJAYA’s 9MFY24 core earnings of RM122.3mn met ours and the street’s expectations, accounting for 71.9% and 73.6% of ours and the consensus’ full-year estimates, respectively.

• A third interim dividend of 3.0sen/share and a special dividend of 4.0sen/share were declared, bringing the YTD dividend to 12.0sen/share (9MFY23: 6.0sen/share).

• YoY, 9MFY24 revenue and core earnings registered significant growth of 27.7% and 25.5%, respectively. This improvement was largely driven by higher progress billing of the construction projects.

• Similarly, its 3QFY24 revenue jumped by 27.7% QoQ, supported by improved progress in construction projects. Correspondingly, core earnings leapt by 24.5% QoQ in tandem with the topline expansion.

Briefing Highlights:

• To recap, KERJAYA has secured RM1.6bn in new jobs YTD, bringing its total outstanding orderbook to RM4.4bn—equivalent to 3.0x FY23 revenue. The group remains confident in achieving its new orderbook replenishment target of RM1.6bn ~ RM1.8bn, supported by a strong tender book of up to RM3.6bn for external jobs. This includes bids for 1 data centre and 1 warehouse construction project, totalling RM1.6bn, with outcomes expected by 1QCY25.

• Furthermore, Rivanis Ventures, a joint venture (JV) between KERJAYA and Aspen Vision Development Sdn Bhd (ASPEN) with a 55:45 holding structure, is moving forward with plans to develop a 36-acre land parcel in Seberang Perai Tengah, Penang. Negotiations for the Head of Agreement with Railway Assets Corporation are in progress and are expected to be concluded by 1QCY25, aiming to secure more favourable terms for the JV while advancing the development.

• That said, we do not foresee any material impact on the earnings in FY25 until the JV’s official project launch, scheduled for FY26. Notably, the 36- acre land parcel is earmarked for 338 affordable housing units along with other development plans, contributing a total gross development value of c.RM1.5bn.

Impact

• No changes to our FY24-26F earnings forecasts. However, we incorporated a higher dividend per share assumption into our earnings model.

Valuation

• We reiterate our Buy call on the stock with an unchanged TP of RM2.79, based on PER 18x CY25 earnings and 3% ESG premium given our 4-star rating. We continue to like KERJAYA for its:- (i) solid earnings visibility, (ii) consistent and robust replenishment of its order book, and (iii) the potential growth in industrial property construction leveraging the partnership with Samsung.

Source: TA Research - 28 Nov 2024