Kerjaya Prospek’s undervalued, says TA Securities


KERJAYA Prospek Group Bhd’s outstanding orderbook, which is near an all-time high, and its steeply discounted share price presents an opportunity for investors.

TA Securities Holdings Sdn Bhd analyst Ooi Beng Hooi stated that as of the end of September 2020, the group has an outstanding orderbook of RM3.6 billion.

The group has since secured two contracts totalling RM126 million in the fourth quarter of 2020.

These projects are namely the works and infrastructure of a sewerage treatment plant for Seri Tanjung Pinang Phase 2A development worth RM64 million and the construction of 170 units of terrace houses, two units of Tenaga Nasional Bhd substations, one surau and other supporting utility buildings at Bandar Cassia in Batu Kawan, Penang, worth RM61.9 million.

“Including the two new job wins, its outstanding orderbook as at end of 2020 is estimated at RM3.5 billion, translating into a healthy revenue cover ratio of 3.5 times financial year 2019 (FY19) construction revenue. This would provide earnings visibility to the group for the next three years.

“While 2020 is a washout year for the construction sector due to Covid-19 and the Movement Control Order (MCO), we expect the building segment to recover in 2021 after the relaxation of the MCO, in line with the projected overall economic recovery in 2021,” Ooi stated in a recent report on the company.

The broker has a ‘Buy’ call on the company with a target price of RM1.61 based on its calendar year 2022 earnings.

“With its strong execution capability, proven track records, healthy balance sheet and a sizable outstanding orderbook, we believe Kerjaya Prospek would be able to sail through this challenging period without much resistance.

“The battered share price could present a golden opportunity for investors to accumulate quality construction companies, such as Kerjaya Prospek, at a deeply discounted price,” said Ooi.

The firm was listed in the Main Market in 1996 as Ulbon Bhd, specialised in lighting, furniture fitting and point of sales manufacturing.

It was subsequently renamed as Fututech Bhd in 2000 and diversified into construction business after securing its first construction project in 2010.

In 2011, Datuk Tee Eng Ho (picture) and Tee Eng Seng emerged as major shareholders in Fututech via a jointly owned company, Egovision Sdn Bhd. Within the same year, the group managed to turn profitability after consecutive years of losses.

Kerjaya Prospek’s turning point came when a Heads of Agreement was executed in February 2015 to acquire Kerjaya Prospek (M) Sdn Bhd and Permatang Bakti Sdn Bhd which are mainly construction services providers for RM458 million.

The acquisition was approved by shareholders in January 2016, and both companies became wholly-owned subsidiaries of the group from Jan 21, 2016, concurrent with the change of company name from Fututech to Kerjaya Prospek.

Since the acquisition, Kerjaya Prospek has been maintaining a healthy balance sheet with a net cash position of RM182.1 million as of the end of September 2020, equivalent to 14.8 sen per share, or 14.8% of its market capitalisation.

The company has in mid-2017 adopted a dividend policy of paying out at least 25% of its net profit. Since the establishment of the dividend policy, Kerjaya Prospek has been paying about 30% of its net profit as a cash dividend, excluding 1:100 share dividend for FY19.