• Kerjaya secured a RM256.4m building contract works from E&O for a proposed landed development at Elmina West, Shah Alam

• This marks its maiden contract win for 2025, meeting 16% of our full-year order book replenishment assumption. This brings the current outstanding order book to RM4.2bn, providing earnings visibility until 2027

• Maintain BUY rating with an unchanged SOP-derived target price of RM2.60

Secured RM256m contract from E&O

Kerjaya Prospek (Kerjaya) announced that it has accepted a letter of award from Eastern & Oriental Express Sdn Bhd, an indirect subsidiary company of E&O, to undertake the building contract works for a proposed development at Elmina West, Shah Alam, for a contract sum of RM256.4m. This contract covers the construction and execution of the infrastructure and 360 units of 3-storey terraced houses across 3 phases. The contract is expected to commence on 20 January 2025 and to be completed within 26 months.

Good start for the year

This award marks its maiden contract win for 2025, meeting 16% of our full-year order book replenishment assumption of RM1.6bn. Assuming a group blended 10% PAT margin, we estimate this project to contribute RM29m PATAMI across 2025–27. Inclusive of this contract, Kerjaya’s outstanding order book value stood at RM4.2bn, translating to a healthy 2.9x cover of 2023 revenue. Moving forward, we expect contract flows to remain robust, underpinned by contracts from both E&O and KPPROP, with both companies planning for launches that total up to RM2.2bn in 2025, potentially translating into RM1bn contract opportunities for Kerjaya. Near-term prospects include KPPROP’s upcoming Shah Alam project (RM175m estimated GDV) and E&O’s Marina Apartments (RM760m estimated GDV).

Maintain BUY with TP of RM2.60

We make no changes to our earnings as this contract falls under our replenishment assumption. We maintain our BUY rating with an unchanged SOP-derived target price of RM2.60. 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 - 7 Jan 2025