KERJAYA: Construction Outlook Strengthens with Robust Order Book, Target Price Revised Upwards
| Key Report Information | |
|---|---|
| Investment Bank | TA SECURITIES |
| TP (Target Price) | RM3.20 (+18.7%) |
| Last Traded | RM2.70 |
| Recommendation | |
A leading construction group has successfully secured its seventh contract win for the financial year 2025 (FY25), significantly bolstering its order book and reinforcing a positive outlook for future earnings. The latest win, valued at RM87.7 million, involves a building contract from Eastern & Oriental Berhad (E&O) for the construction of shop lots and electrical substations in Elimina, Shah Alam, with project completion expected within 30 months.
This recent achievement elevates the group’s year-to-date (YTD) new order book to a robust RM958 million. With this incorporation, the total outstanding order book now stands at approximately RM4.0 billion, translating into 2.1 times the FY25 revenue forecast. This provides strong near-term earnings visibility and is projected to contribute RM8.8 million in net earnings over the construction period.
Order Book and Future Prospects
Despite the current YTD new order book win accounting for 53.2% of the FY25 full-year replenishment assumption of RM1.8 billion, analysts remain confident that the group is on track to meet its remaining replenishment target in the coming months. This confidence is underpinned by a steady pipeline of job flows from both internal and external sources.
Upcoming in-house developments are expected to be a significant driver for order book replenishment. These include E&O’s Andaman Island launches (RM1.0 billion Gross Development Value, GDV) and the group’s own planned projects in Shah Alam (RM250 million GDV), Damansara Damai (RM430 million GDV), and Batu Kawan (RM630 million GDV). Conservatively, these projects alone could generate an estimated RM1.2 billion worth of new construction jobs.
Furthermore, the external tender book remains strong, ranging between RM1.5 billion to RM2.0 billion. This primarily comprises residential projects, alongside two ongoing data centre tenders and several industrial jobs in partnership with Samsung C&T, valued between RM2 billion and RM3 billion. Collectively, these internal and external prospects provide healthy replenishment visibility and strengthen the conviction that the group will meet its FY25 new order book replenishment assumption.
Investment Rationale and Valuation
TA SECURITIES has maintained its “BUY” recommendation on the stock, revising its target price upwards to RM3.20 from the previous RM3.02. This revised target price implies a potential upside of 18.7% from the last traded price of RM2.70. The upward revision is based on a higher target Price-to-Earnings (PE) multiple of 17x for Calendar Year 2026 (CY26) EPS, up from 16x previously, and includes a 3% ESG premium, reflecting the group’s 4-star ESG rating.
The investment bank deems the higher PE multiple warranted given the group’s robust job replenishment visibility, sustained strong double-digit net margins of 10-12% for FY25-27F, and attractive projected dividend yields of 4.4% and 5.2% for FY25 and FY26, respectively. The group’s solid earnings visibility, consistent order book replenishment, and potential growth in industrial property construction through its partnership with Samsung are key factors supporting the positive outlook.
