Main Market-listed Kitacon says no impact from property overhang issue, rises 46% on debut

• Kitacon is a G7 building construction contractor involved in the construction of buildings in Malaysia. It carries out construction works for both residential and non-residential buildings. 

KUALA LUMPUR (Jan 17): Kumpulan Kitacon Bhd, which made its debut on the Main Market of Bursa Malaysia with a 45.6% premium, said the group is unlikely to be affected by the challenging property market outlook, where demand could be further depressed by a possible hike in the overnight policy rate in 2023.

This is despite some investment analysts seeing an increase in the overhang of both residential and commercial properties, although the home price index has begun to soften in 2022. They also said that any further deterioration in property market conditions could negatively impact the group's revenue.

Kitacon is a G7 building construction contractor involved in the construction of buildings in Malaysia. It carries out construction works for both residential and non-residential buildings. 

Residential building construction services (for landed properties) contributed about RM381.3 million or 84% of the group’s revenue for the financial year ended Dec 31, 2021 (FY2021), followed by non-residential building construction services (for commercial buildings) at 15.9%, and other related services, such as earthworks, roadworks, hoarding works, rectification works, piling works and infrastructure works (0.1%). 

The group’s client base consists of Sime Darby Bhd, S P Setia Bhd, Tropicana Corp Bhd, and Eco World Development Group Bhd. 

“We are not much affected by the property overhang. If you are talking about challenges, I think it is mainly for urban condo serviced apartments,” Kitacon managing director Tan Ah Kee told reporters at a press conference after the group’s listing on Tuesday (Jan 17). 

Kitacon was traded at 99 sen a share at the opening bell, 31 sen higher than its initial public offering price of 68 sen. 

At the time of writing, the top actively traded stock saw its trading volume surge to 132.93 million shares, more than seven times the opening volume of 19.18 million.

The counter was trading up 15.44% or 10.5 sen at 78.5 sen, giving it a market capitalisation of RM392.5 million. 

Kitacon has RM853.6 million worth of unbilled contracts on hand, and expects to realise them within the next two years. It is on track to complete most of its 25 ongoing projects within FY2023, looking forward to replenishing its order book by securing part of its ongoing tender book worth RM3.5 billion.

The success rate of the RM3 billion tender book stands at about 25% to 30%, Tan noted. 

He also explained that 95% of the group’s township developments are located in the Klang Valley, with the remaining 5% in Johor and Negeri Sembilan.