KERJAYA: New Contract Wins Bolster Outlook, Analyst Reaffirms ‘Buy’ Rating
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent research report by TA Securities highlights significant new contract wins that are set to substantially boost a construction group’s outstanding order book and ensure robust earnings visibility for the near term. The firm maintains its “Buy” recommendation, citing a healthy order book cover and strong future growth prospects.
Strong Order Book Boosted by New Contracts
The company has successfully secured two new contracts with a combined value of RM197.7 million. The first contract, valued at RM100.2 million, involves the construction of a 39-storey serviced apartment, Viera 15, in Shah Alam, with an expected completion timeline of 34 months starting November 2025.
The second contract, worth RM97.5 million, is for the construction of five canal bridges at Andaman Island Penang. This project is scheduled for completion within 33 months, also commencing in November 2025.
These latest wins have propelled the group’s year-to-date new job acquisitions for FY25 to approximately RM1.2 billion. Following an estimated order book burn rate, the outstanding order book is now projected to stand at approximately RM3.7 billion. This represents a healthy 2.0x cover of the firm’s FY25F revenue forecast, providing a solid foundation for near-term earnings.
Sustained Earnings Visibility and Future Growth
The newly secured contracts alone are anticipated to contribute a combined RM19.8 million in net earnings over their respective construction periods, based on a consistent net margin of 10% from in-house projects. This strong order book is expected to sustain the company’s earnings visibility.
Looking ahead, the outlook for order book replenishment remains solid, driven by robust upcoming in-house property project launches with an estimated combined Gross Development Value (GDV) of around RM1.9 billion. Furthermore, the company is actively pursuing an external tender pipeline exceeding RM3.0 billion. Assuming a conservative 20% win rate on these tenders, the firm could secure at least RM600 million in new job wins, putting it well on track to meet its FY25F new order book target.
Investment Rationale
TA Securities maintains its “Buy” recommendation on the stock with an unchanged target price of RM3.20. The rationale for this rating is underpinned by the group’s robust earnings visibility, consistent and strong replenishment of its order book, and the potential for growth in industrial property construction, particularly through its partnership with Samsung.
