KERJAYA: Major Contract Win Boosts Order Book and Earnings Outlook
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM3.39 (+32.5%) |
| Last Traded | RM2.56 |
| Recommendation |
A leading construction group has secured a substantial RM500.3 million contract for reclamation and dredging works, significantly enhancing its order book and providing robust earnings visibility. The contract, awarded for the Seri Tanjung Pinang Phase 2B & 2C (STP2) development in Tanjung Tokong, Penang, marks the firm’s second major job win in the current financial year.
Contract Details and Financial Impact
The newly secured contract involves reclamation and dredging works at the Seri Tanjung Pinang development. Work is scheduled to commence on March 11, 2026, with a targeted completion date on or before March 31, 2029. This award boosts the company’s year-to-date new order book to RM703.5 million. Consequently, the total unbilled order book now stands at an impressive RM4.4 billion, providing a strong 2.4 times cover of its FY24 construction segment revenue. Analysts estimate that, assuming a conservative 8% net margin, this contract alone is expected to contribute approximately RM40 million in net earnings over its construction period.
Future Outlook and Pipeline
The construction group’s active tender book is estimated to be between RM2.0 billion and RM3.0 billion. Over 50% of this pipeline is anticipated to originate from related-party developments, particularly given the plans by associated property groups to launch approximately RM1.0 billion in gross development value (GDV) annually. This could potentially translate into about RM1.2 billion in new job replenishment opportunities for the construction firm, based on an assumed gross development cost proportion of 60%. Beyond related-party projects, the company is also eyeing external opportunities, including two ongoing data centre tenders and multiple industrial property projects under its joint venture with Samsung C&T, collectively valued at RM1.0-2.0 billion. The firm’s earnings forecast remains unchanged, as this latest contract win aligns with existing assumptions.
Analyst’s Recommendation
TA Securities has reiterated its “Buy” recommendation on the stock, maintaining an unchanged target price of RM3.39. This target price is based on a target Price-to-Earnings Ratio (PER) of 17x for CY26 EPS, with an additional 3% ESG premium applied, consistent with its 4-star ESG rating. The investment bank continues to favor the company due to its solid earnings visibility, consistent and robust order book replenishment, and the growth potential in industrial property construction through its strategic partnership with Samsung.
