Kenanga Research has maintained its OUTPERFORM call on KJTS Group Berhad and raised its target price to RM1.60 from RM1.57 after the energy services provider secured four 20-year agreements in Thailand that will strengthen its recurring income base.
KJTS’ Thailand subsidiary, KJTN Engineering Company Limited, entered into four agreements with subsidiaries of Central Plaza Hotel Public Company Limited (Centel) covering retrofit works, operations and maintenance (O&M) services, and chilled water supply across four hotels in Thailand.
The projects involve total retrofit capital expenditure of about RM11 million, which will ultimately be funded by KJTS. Retrofit works are expected to be completed by February 2027.
The subsequent 20-year O&M and chilled water supply agreements will run from March 2027 until February 2047, generating total fixed fees of approximately RM48 million.
This translates into around RM2.4 million in recurring annual revenue, excluding additional monthly variable fees based on the volume of chilled water supplied.
Kenanga Sees High-Single-Digit Returns
Kenanga is positive on the agreements, saying their long tenure will further strengthen KJTS’ recurring income base while expanding the group’s energy services footprint in Thailand.
Assuming the projects are financed using an 80:20 debt-to-equity structure and variable fees of 0.14 sen per refrigeration tonne-hour (RTh), Kenanga estimates the projects could generate a high-single-digit internal rate of return (IRR).
Financing is unlikely to present a major obstacle, according to the research house. KJTS had a relatively low gross gearing ratio of 0.23 times as at June 30, 2026, providing room to take on additional project financing.
Centel is also an existing KJTS customer, with KJTN having previously undertaken three cooling projects for the group. Kenanga believes the existing relationship could pave the way for further project rollouts.
The latest contracts represent another sizeable cooling project secured by KJTS in Thailand less than two years after its previous award in April 2025, further strengthening the group’s track record in the market.
Thailand Remains Key Growth Market
Kenanga remains positive on KJTS’ Energy Efficiency segment, identifying Thailand as an important growth market for the group.
Growing adoption of energy-efficiency and decarbonisation initiatives across commercial properties, including hotels and retail buildings, is expected to support demand for cooling optimisation and energy-management services.
Air-conditioning typically represents one of the largest sources of electricity consumption in commercial buildings, giving property owners a financial incentive to invest in more efficient cooling systems to reduce energy costs and improve operating efficiency.
Kenanga believes this puts KJTS in a favourable position to capture additional opportunities as commercial property owners increasingly pursue energy savings and decarbonisation targets.
Earnings Forecasts Raised
Following the four contract wins, Kenanga raised its FY26 and FY27 earnings forecasts for KJTS by 2% and 5%, respectively.
A full-year earnings contribution from all four systems is expected from FY27 once they become fully operational.
The research house also lifted its target price to RM1.60 from RM1.57 after incorporating the projects into its discounted cash flow-based sum-of-parts valuation.
Its valuation is based on a 16 times FY27 forecast price-to-earnings multiple for KJTS’ engineering, procurement, construction and commissioning business, a discounted cash flow valuation for concession assets and a 10 times FY27 multiple for the iHandal acquisition.
Kenanga also assigns RM0.80 per share to the potential value of KJTS’ 10% joint venture with Stonepeak.
Beyond the Thailand expansion, Kenanga sees Malaysia’s estimated RM41 billion energy opportunity as a significant avenue for KJTS to expand its higher-margin recurring concession income.
The research house also highlighted the Stonepeak joint venture and MUSB, which it said provides exposure to the government’s asset transformation strategy, as key components of its investment case.
With the latest Thailand projects adding another two decades of contracted recurring income and providing potential for further expansion with an existing customer, Kenanga maintained its OUTPERFORM recommendation and RM1.60 target price on KJTS.
