Kerjaya Prospek confident in defending profit margin this year

• In a recent briefing, Kerjaya Prospek said it would prioritise tendering for contracts valued between RM300 million and RM500 million, which are less competitive, and thus could yield better margins. 

KUALA LUMPUR (May 24): Construction firm Kerjaya Prospek Group Bhd anticipates that its profit margins will remain steady in the current year  in comparison to the previous year, because of lower building material costs and a selective approach to which jobs the company tenders for.

In a recent briefing, Kerjaya Prospek said it would prioritise tendering for contracts valued between RM300 million and RM500 million, which are less competitive, and thus could yield better margins. 

“We should be able to maintain profit margin this year and hopefully, improve it,” its non-independent, non-executive chairman Datuk Tee Eng Ho told at a briefing on the group's results for the first quarter ended March 31, 2023 (1QFY2023). 

The group’s net profit margins stood at 9.9% as at end-March 2023, 10.21% in FY2022, and 9.92% in FY2021. 

For 1QFY2023, the group registered a net profit of RM29.41 million, a slight increase from RM28.86 million a year ago, while revenue inched down 1.1% to RM297.25 million, from RM300.59 million during the same period. 

The group attributed the lower revenue to the slower progress of construction work activities during the quarter under review. 

It had declared a first interim dividend of two sen per share, with an ex-date at June 12, 2023 and payment date at July 6, 2023.

Commenting on the outlook for the construction industry, Tee said the environment remains challenging and expects the situation to persist over the next one- to two years.   

Among the main challenges are the shortage of infrastructure jobs by the government,  the shortage of workers, the increase in workers' minimum wage, as well as cash flow issues faced by contractors, according to Tee. 

This will result in less players going forward, as some of them will be phased out when they cannot survive. 

Tee is confident that Kerjaya Prospek Group will survive given its net cash position of RM260.2 million and with an outstanding construction order book worth RM4.5 billion in hand. The group expects the outstanding construction order book to provide earnings visibility for the next three- to four years.   

Additionally, Tee said the group’s labour shortage issue is expected to be resolved by the second half of this year, as it will bring in another 1,100 foreign labourers in phases, going forward. Currently, the group has about 4,000 construction workers. 

Meanwhile, the group has maintained its new contract win target of RM1.2 billion for this year, after securing a RM533.4 million contract so far this year. Tee said the group aims for job wins in areas such as high-rise projects in the Klang Valley and Penang.  

Of the RM533.4 million, RM135.4 million is for BBCC Development — a 21-storey building development, while the remaining RM398 million is for Tanjung Pinang Development — a construction of coastal protection structure for phase 2B and 2C at Andaman Island.