KERJAYA: Earnings Forecast Raised as Order Book Strengthens, Target Price Lifted

Investment bank TA Securities has reiterated its “BUY” recommendation for the company, significantly raising its target price and upwardly revising earnings forecasts for 2025-2027. This positive outlook is underpinned by robust contract replenishment momentum, a strong outstanding order book, and strategic initiatives in property development and data centre projects.

Robust Order Book and Strategic Growth

The company continues to demonstrate strong contract replenishment, with its outstanding order book now standing at RM4.4 billion. This robust pipeline provides earnings visibility up to 2028 and represents a healthy 2.4 times cover ratio on its FY24 revenue. Actual contract wins in 2025 have already surpassed previous assumptions, leading management to guide for a higher internal replenishment target of RM2 billion in 2026. Consequently, TA Securities has revised its order book replenishment assumptions to RM1.8 billion and RM2.0 billion for 2025-2026, up from previous estimates of RM1.6 billion and RM1.8 billion, respectively. This adjustment reflects stronger construction earnings and improved earnings visibility, leading to a 3-8% increase in EPS forecasts for 2025-2027.

Property Development and Data Centre Opportunities

Beyond construction, the property development segment is increasingly contributing to the group’s earnings. Projects like The Vue and Papyrus are nearing handover in the first half of 2026 with strong take-up rates of 99% and 82% respectively, ensuring healthy near-term billings. Supported by a net cash position of RM286.7 million, the company is actively pursuing land acquisitions to further strengthen its property development pipeline and unlock opportunities in industrial park development. A sizeable 89-acre landbank, including key areas like Jalan Puchong, Tanjung Bungah, Seberang Perai, and Batu Kawan, holds a combined Gross Development Value (GDV) potential of approximately RM3 billion, poised to be meaningful earnings catalysts over the medium term.

A significant new avenue for growth is the company’s joint venture with Samsung C&T, which is actively bidding on two major tenders for data centre projects. One of these tenders is nearing finalisation, with a potential to add an estimated RM1 billion to the order book. This strategic move is expected to provide a meaningful uplift to earnings visibility over 2026-2027, diversify the project mix towards higher-value industrial and data centre projects, and improve earnings quality and tenure. This exposure to data centres is also seen as a catalyst for a potential re-rating of the company’s valuation.

Financial Outlook and Risks

TA Securities’ valuation is based on a Sum-of-Parts (SOP) derived target price, applying an 18x PER for the construction segment. Management has guided that the net margin is expected to remain stable at 10%, driven by consistent construction execution and recurring property sales. The company also offers an attractive dividend yield, with management targeting an annual dividend per share (DPS) of 11-12 sen for 2025-2027, although no special dividend is expected for 2025 as the group conserves cash for potential landbank acquisitions.

Key downside risks to this positive outlook include slower-than-expected order book replenishment, higher-than-expected raw material costs, unforeseen project delays, and a potential slowdown in the broader property market. Despite these risks, the overall robust pipeline, strategic expansions, and strong earnings visibility justify the elevated target price and continued “BUY” rating.