Mercury Securities maintains a “buy” recommendation on Kerjaya Prospek Group Bhd with a revised trading price of RM1.46 (up from RM1.33) based on the financial year 2023 future earnings per share of 10.1 sen and price-to-earning ratio of 14.5x in line with the two-year average.
Results were above expectations, achieving 112.1% and 110.5% of Mercury Securities’ full-year revenue and profit forecasts for last year, due to improved progress on construction work activities.
The securities firm views the stock favourably for its strong order book and track record. Kerjaya Prospek Group Bhd has recently secured another approval for 1,000 additional foreign workers who are expected to arrive within quarter two of the year 2023.
Now that operations have fully resumed, the securities firm believes that projects will run more smoothly since its workforce has been fully vaccinated, effectively reducing work stoppages moving forward.
Kerjaya has net cash of RM 245 million as of February 2023 (up from RM 215 million), which allows the company the potential capacity to undertake more projects moving forward.
The company was also, in the recent quarter, awarded a RM 398 million construction contract for coastal protection structure from Tanjung Pinang Development Sdn Bhd (TPD). With the acceptance of the letter of appointment from TPD, the year-to-date contract win will amount to RM 533.4 million.
Note that Kerjaya has an outstanding order book of RM 4.7 billion as of February 2023 (RM 1.7 billion from related parties and RM 613 million from infrastructure projects), which should enhance earnings over the next five years.
The company also has a tender book of between RM 1.5 billion to RM 2 billion focused on building jobs, and a tender success rate of more than 20%, which if successful will increase the order book.
Expanding on this, Mercury Securities estimated an annual target order book replenishment of RM 1.5 billion to RM 1.8 billion in 2023. The securities firm added that the company has an experienced management team led by non-independent non-executive chairman Datuk Tee Eng Ho, having more than 30 years of experience in civil and building construction.
Even during the Covid-19 pandemic, the company has won more than RM 900 million worth of project value from established property developers in 2021, of which 40.8% are from related parties.
The company has several notable ongoing projects such as Astrum Ampang and Bloomsvale Old Klang Road, with a contract value of more than RM 500 million.
Notable projects such as the Lucentia Residence and Megah Rise which has a contract value of more than RM 200 million were completed in the first half of 2022.
Mercury Securities further listed several risk factors for Kerjaya, which were failure to secure new projects, unexpected project cancellations, delays, or postponement of projects, unanticipated increases in construction costs for projects, and the prolonged Covid-19 pandemic.
