KERJAYA: Earnings Beat Expectations on Robust Revenue, Future Outlook Positive

Performance Review

A leading construction firm reported core earnings of RM100.0 million for the first half of fiscal year 2025 (IHFY25), significantly exceeding both TA Securities’ and consensus full-year estimates by 54.2% and 51.5% respectively. This strong performance was primarily driven by better-than-anticipated revenue recognition from ongoing construction projects and a robust contribution from its property division.

Year-on-year, the company experienced a notable increase in revenue and core earnings, rising by 38.1% and 33.4% respectively. This was underpinned by accelerated progress billings across both construction and property segments. Quarter-on-quarter, revenue surged by 14.3%, boosted by higher contributions from the property division, reflecting stronger take-up rates for projects like The Vue (94%) and Papyrus (71%) as of June 2025. This led to a 26.7% increase in core net profit, aligning with topline growth. The firm also declared a second interim dividend of 3.0 sen per share, bringing the year-to-date payout to 6.0 sen per share.

Future Outlook and Order Book

The company has successfully secured RM870.3 million in new contracts year-to-date, expanding its outstanding order book to RM3.9 billion as of end-June 2025. This substantial order book provides healthy earnings visibility extending up to fiscal year 2028, equivalent to 2.2 times its FY24 construction revenue. Despite some delays in external job replenishment due to global uncertainties, management remains optimistic, targeting at least RM1.6 billion in job wins for FY25. This confidence is bolstered by a strong pipeline from a sister company with planned launches estimated at RM2.0 billion in gross development value (GDV) across FY25-26F.

The finalisation of tender results for a significant Klang Valley-based data centre project, valued at RM1.0-1.5 billion, is anticipated by end-4QCY25. The firm is considered well-positioned for this project, leveraging its joint venture capabilities. On the net margin front, a positive outlook prevails, with an expected 1.0 percentage point improvement from 9.5% in FY24 as lower-margin projects are phased out. Following the completion of the RM1.5 billion Texas Instruments factory job (secured in CY22 with relatively thinner margins) by end-August 2025, net margins are expected to normalise to double-digit levels, in line with the FY25F estimate of 10.5%.

Analyst Recommendation

TA Securities maintains its “BUY” recommendation for the stock, raising its target price to RM0.25, representing a 25.0% upside. The revision incorporates higher earnings estimates for FY25-27F by 7.2%, 1.5%, and 3.7% respectively, based on revised progress billing assumptions. The investment bank highlights the company’s solid earnings visibility, consistent order book replenishment, and potential growth in industrial property construction through strategic partnerships.