KERJAYA: Construction Sector Firm Poised for Growth with Upgraded Earnings and Robust Project Pipeline

A leading investment bank has highlighted a positive outlook for a key player in the construction sector, revising its earnings estimates upwards for future fiscal years and maintaining a strong “BUY” recommendation. This optimistic view is underpinned by robust operational performance, strategic cost management, and a healthy project pipeline.

Financial Performance and Outlook

Analysts have revised the company’s earnings forecasts for FY26F and FY27F upwards by 3% each, reflecting increased confidence in its future profitability. While FY25F earnings estimates remain unchanged, this is primarily attributed to the timing of new job recognitions, which are anticipated to contribute significantly from early FY26F onwards. The firm’s target price has been adjusted to MYR3.45, reflecting an estimated 22% upside potential and incorporating a 2% ESG premium, underscoring the importance of sustainable practices in its valuation.

Order Book and Strategic Initiatives

The company is on track for a potentially record-breaking year in job replenishment, with expectations to secure MYR2.1 billion in new contracts for FY25, an upward revision from previous estimates. This strong performance is supported by an active tender book valued at approximately MYR2 billion, with a significant portion stemming from related-party transactions, ensuring a steady flow of work. Furthermore, a healthy pipeline of projects, particularly from the Andaman Island development, is expected to generate substantial contract value in the coming years, reinforcing long-term growth prospects. The company also boasts a strategic landbank of about 89 acres, primarily in Penang, which holds an estimated Gross Development Value (GDV) of MYR3 billion. This asset base ensures long-term revenue for its property development arm, with new launches anticipated from FY26.

Addressing Challenges and Mitigating Risks

Despite a generally positive outlook, the construction sector faces potential headwinds, including a property market slowdown and prolonged cost pressures. However, the company’s robust project flow and strategic management of new contract acquisitions are seen as key mitigants. While prevailing industry conditions might contribute to softer utilization in certain areas, the firm’s strategic focus on securing diverse projects and ensuring efficient execution is expected to sustain growth and healthy margins, partly driven by continued cost efficiencies.

With its strong financial trajectory, solid order book, and proactive strategic planning, the company is well-positioned for continued growth and value creation in the construction and engineering sector.