KERJAYA: Strong First-Half Performance Driven by Property Sales and Project Progress, Analyst Reiterates Buy

Performance Review

A leading construction and property developer has reported a robust financial performance for the first half of 2025 (1H25), with core profit significantly exceeding market expectations. The company’s 1H25 core profit of MYR100 million represents a substantial 33.4% year-on-year increase and accounted for 53% of the investment bank’s and 50% of the Street’s full-year projections, indicating a positive deviation.

The strong results were primarily driven by a stronger-than-expected performance in its property segment, where 1H25 PAT quadrupled to MYR18.4 million from MYR4.5 million in 1H24. This was largely attributed to successful property sales from developments such as The Vue @ Monterez and Papyrus @ North Kiara. Concurrently, the construction segment also posted a commendable PAT of MYR96 million, a 24.6% year-on-year rise, sustained by higher progress billings from ongoing projects and maintaining a healthy PAT margin of 10.8%. The company also declared a cumulative dividend per share (DPS) of MYR0.06 for 1H25, setting a positive trajectory towards its FY25 forecasted DPS of MYR0.12.

Order Book and Future Outlook

As of end-June, the company’s construction orderbook stood at approximately MYR3.9 billion, representing a robust 2.3x cover ratio. Year-to-date, the company has secured about MYR870 million in new jobs, though this is below the FY25 job replenishment assumption of MYR1.6 billion. Nevertheless, the group is actively tendering for projects worth MYR2-3 billion, including a standalone data centre opportunity. It is also exploring involvement in MYR2-3 billion worth of industrial sector tenders (data centres, factories, warehouses) through a joint venture with Samsung C&T.

Significant opportunities are identified in Penang, with upcoming jobs in Andaman Island potentially contributing MYR400-500 million for the remainder of 2025. Additionally, Eastern & Oriental projects with a total gross development value (GDV) of MYR3.8 billion are anticipated to offer approximately MYR1.5 billion in potential construction value between 2026 and 2030.

Investment View and Risks

Following the better-than-expected results, the investment bank has revised its FY25-27F earnings forecasts upwards by +7%, +5%, and +5% respectively, primarily on higher progress billings from both property and construction projects. Consequently, a new SOP-derived Target Price of MYR2.92 has been established, which includes a 2% ESG premium. This valuation positions the stock’s FY26F P/E of 12.3x as undemanding when compared to the Bursa Malaysia Construction Index’s P/E of 16-17x.

Potential rerating catalysts include earlier-than-expected wins of new industrial jobs, particularly data centres, and a quicker-than-anticipated development of the company’s 83 acres of land in the Klang Valley and Penang, which holds a potential GDV of at least MYR7 billion. However, downside risks include a potential property market slowdown and prolonged cost pressures.