KJTS: New Contracts Bolster Long-Term Outlook, Investment Rating Maintained
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent development in the facilities management sector indicates a strategic expansion of services, which analysts believe will strengthen long-term recurring income streams. The company has finalized a supplemental agreement to extend its service coverage, adding an eighth site to its existing portfolio of KIPMalls.
The revised contract involves an upfront capital expenditure of approximately RM22.9 million across all eight locations. A new fixed chilled water fee of RM1.6 million per annum is stipulated, comprising a base fee of at least RM426,000 annually, complemented by a variable component based on actual consumption. Retrofit works for the expanded services commenced in April of this year, with completion projected for July next year. Following completion, the operations and maintenance (O&M) and chilled water supply services are set to continue until 2046, providing a stable long-term revenue base.
This contract award is viewed as a significant step in reinforcing the company’s recurring income, especially given its association with KIP REIT, a client notable for its robust 97.8% occupancy rate and strong tenant relationships, supported by anchor tenants such as Econsave, Jaya Grocer, Giant, and Hwa Thai. Analysts suggest this initial engagement could serve as a valuable platform for securing future contracts from KIP REIT, particularly as other properties within their portfolio, such as AEON Mall Kinta City and TF Value Mart – Hypermarket, have yet to fully utilize the company’s specialized offerings.
Analysts from Malacca Securities noted that this job win was within their expectations, leading them to maintain their earnings forecast for the company. Consequently, the firm has reiterated its BUY recommendation, setting a target price of RM2.00. This valuation is based on a P/E multiple of 45x pegged to their FY26F EPS of 4.44 sen, reflecting confidence in the company’s future earnings potential. The last traded share price for the company was RM1.51.
