by NUR HAZIQAH A MALEK / Pic by TMR FILE PIX
KERJAYA Prospek Group Bhd’s share price has room to climb higher after the company secured its first contract this year, with analysts revising the stock’s target price (TP) by up to 19%.
RHB Investment Bank Bhd analysts Muhammad Danial Abd Razak and Eddy Do Wey Qing raised their TP on Kerjaya Prospek to RM1.71 from RM1.28, as they expect contribution from the company’s property segment to turn meaningful with two new launches planned this year.
“Given its strength in job replenishment and a potential rise in property sales, we believe Kerjaya Prospek has the ability to achieve a 30% compound annual growth rate in the next three years,” they noted in a report yesterday.
The stock trades at an attractive valuation of 10 times price-earnings ratio (below five-year mean) to financial year 2022 earnings per share.
Kerjaya Prospek clinched its first 2021 award last week via its 49%-owned associated company, Kerjaya Bina BMK Sdn Bhd, which received an award letter from BBCC Development Sdn Bhd to construct the main building for a project at Jalan Pudu in Kuala Lumpur.
BBCC is a joint-venture company set up by the Employees Provident Fund, UDA Holdings Bhd and Eco World Development Group Bhd.
The contract raises Kerjaya Prospek’s outstanding orderbook to RM3.4 billion, with its contract value estimated at RM153.5 million, with works expected to commence on April 15, 2021, and reach completion within the next 30 months.
“The award represents its first win this year, bringing the total outstanding orderbook to RM3.4 billion.
“Moving forward, we believe its new job replenishment, which continues to show strong momentum, will allow Kerjaya Prospek to enhance its bottom line and further strengthen its recovery post-pandemic,” the analysts said.
The analysts added that there has been no change in the estimates for earnings, but the TP was adjusted higher after rolling over the valuation to the financial year of 2022 (FY22).
“The new award represents 15% of our annual replenishment target, which is within expectation.
“We expect earnings from property development to turn meaningful in FY21, with two new projects expected to be launched in the second half. These are Yakin Land and Monterez developments with a combined gross development value of RM630 million,” they stated.
Construction works on the two projects began in 2019 and 2020 respectively, with billings to be progressively recognised once the developments are launched and taken up.
Among the key downside risks for the stock include margin erosion from increasing competition, higher raw material prices, lower than expected new contract wins, and a severe slowdown in the property market, its largest client base.
“Sudden restrictions on activities — possibly due to tighter lockdown measures, if implemented — may present another downside risk,” they noted.