KUALA LUMPUR (July 20): Shares in Kerjaya Prospek Group Bhd rose as much as 3% to hit its historical high in early trades today, after the group secured a RM214 million construction contract and declared a four sen dividend.
At 10.23 a.m., the stock was traded at RM2.40, up four sen or 1.69% after hitting a high of RM2.43, post 463,100 shares traded. It had a market capitalisation of RM1.19 billion.
The construction outfit told the stock exchange yesterday that it clinched a contract worth RM213.75 million from Yong Tai Bhd for the construction of main building works of a proposed mixed development project known as “The Apple”.
The jobs will commence next month and is to be completed in 27 months.
Kerjaya Prospek has declared a four sen interim dividend, amounting to about RM21 million, payable on Aug 18. Last year, the group declared a total dividend of three sen per share.
Meanwhile, in a note to clients today, Kenanga Research said it is positive on the latest job win and noted that the group has secured RM986 million worth of contract year-to-date (y-t-d), surpassing Kenanga's initial RM500 million target.
Following the win, the research firm raised Kerjaya Prospek's financial year 2016 (FY16) and FY17 order book replenishment target to RM1.1 billion - RM1.2 billion, from RM500 million previously.
In the current challenging property market where sales are weak, Kenanga Research said developers are focusing on delivery to preserve margins and strengthen brand quality; making realising unbilled sales with quality products without delays, paramount.
Thus, the firm believes Kerjaya's sterling track records of timely delivery have caused them to become sought after by prominent developers.
"Kerjaya Prospek is now able to command premium margins over other contractors and only accepts contracts at 10%-12% profit after tax (PAT) level.
"Considering that their long-term recurring clients have high-rise developments lined up, namely Bukit Bintang City Centre (BBCC, by Ecoworld), and Puro Place (E&O), we can be expecting more contract flows from them," the firm added.
In term of peers comparison, Kenanga Research said Kerjaya Prospek's construction margins remain one of the highest, with first quarter financial year 2016 (1QFY16) PAT margin of 14% versus other small-mid cap peers’ range of 6-9%.
"Their RM2.7 billion outstanding order book also provides earnings visibility of 2.5 years, which is above peers’ average of 2 years," it said, adding that the group is also one of the few contractors standing at net cash, besides Pintaras Jaya Bhd and Econpile Holdings Bhd.
"If Kerjaya Prospek dishes out dividend payout ratio (DPR) of 30%, it would be the second highest among contractors in our space, losing out to only Pintaras Jaya which offers 56%," it said.
Given all this, Kenanga has upgraded Kerjaya Prospek's earnings forecast for FY16 and FY17 by 5% to 18%, to RM95.4 million and RM117.7 million respectively.
"While FY16 earnings growth is immaterial, we note that FY17 growth of 24% is relatively strong against peers’ 2-year compounded annual growth rate (CAGR) growth of 14-21%," it added.
The firm has a "Trading Buy" with a higher target price of RM2.62, from RM1.69, providing an upside of 13.2%. — theedgemarkets.com