KERJAYA: Strong Financial Performance Driven by Construction and Property Segments, Target Price Raised

Core earnings for the recent nine-month period (9MFY25) significantly surpassed market expectations, accounting for 90% of our forecasts and 87.7% of consensus estimates. This robust performance was primarily attributed to stronger-than-expected progress billings from the construction division and higher-than-anticipated contributions from the property development segment.

Year-on-year, 9MFY25 saw revenue jump by 27.5% and core earnings surge by 45.5%, underpinned by accelerated progress billings across both construction (+15.0%) and property divisions (+365.8%). On a quarter-on-quarter basis, third-quarter (3Q25) revenue improved by 5.0%, largely supported by increased contributions from the property segment. Enhanced take-up rates at in-house projects like The Vue@Monterez and Papyrus@North Kiara significantly boosted revenue recognition, consequently driving a 39.6% increase in core net profit for the quarter.

Despite these positive developments, the operating margin experienced a 250 basis points (bps) contraction quarter-on-quarter, mainly due to the recognition of a one-off RM20.5 million allowance for expected credit loss in 3QFY25. However, the core net margin saw a notable improvement of 340 bps QoQ, driven by a lower effective tax rate of 20% in 3QFY25, down from 33.4% in 2QFY25.

Future Outlook and Recommendation

The company has successfully secured approximately RM1.6 billion in new contracts year-to-date FY25, bringing its total outstanding order book to RM4.1 billion. This robust order book provides healthy earnings visibility for the next three to four years, equivalent to 2.2 times its FY24 construction revenue.

In light of the stronger-than-expected progress billings from the construction segment and the increasing order book pipeline with better margins, our progress billing and PAT margin assumptions for FY25-27 have been revised upwards. These revisions have collectively lifted earnings forecasts by 11.5%, 4.4%, and 3.2% for the respective years. The company’s strategy includes phasing out lower-margin projects, further enhancing profitability.

The investment bank maintains its “BUY” recommendation for the stock, citing solid earnings visibility, consistent and robust order book replenishment, and potential growth in industrial property construction leveraging strategic partnerships. An attractive projected FY25 dividend yield of 4.3% is also anticipated, based on a projected FY25 dividend payout of 12.0sen/share.