KUALA LUMPUR: Kerjaya Prospek Group Bhd’s earnings is likely to contract 36.6 per cent to RM88.9 million in the financial year ended December 31, 2020 (FY20), mainly due to the Covid-19 outbreak, said TA Securities Holdings Bhd.
TA Securities said the property developer’s earnings could rebound 61.5 per cent to RM143.6 million in FY21, before growing 15.0 per cent to RM165.2 million in FY22.
“Our earnings projections are premised upon the following assumptions on revenue contraction of 24.9 per cent in FY20 before rebounding 57.8 per cent and 8.0 per cent in FY21 and FY22 respectively, backed by an outstanding order book of RM3.6 billion as of end-September 2020,” it said in a research note today.
TA Securities expects Kerjaya’s order book replenishment to reach RM1.2 billion for FY21 and RM1.25 billion for FY22.
Although 2020 was a washout year for the construction sector due to Covid-19 pandemic and the Movement Control Order (MCO), the firm said the building segment was expected to recover in 2021 after the relaxation of MCO, in line with the projected overall economy recovery in 2021.
“Kerjaya has been maintaining a healthy balance sheet with a net cash position. As of end-September 2020, it has net cash of RM182.1 million, equivalent to 14.8sen per share, or 14.8 per cent of its market capitalisation.”
It said the company had in mid-2017 adopted a dividend policy of paying out at least 25 per cent of its net profit.
“We assign a target price earning multiple of 12 times to Kerjaya and arrive at a target price of RM1.61 based on 2022 earnings.”
TA Securities said this is on premise of Kerjaya’s position as a well-respected building contractor in Malaysia; healthy balance sheet and experienced management team with proven track records as well as reasonable dividend yield of about 3.5 per cent and 4.0 per cent projected for FY21 and FY22.
“We believe Kerjaya would be able to sail through this challenging period without much resistance. The battered share price could present a golden opportunity for investors to accumulate quality construction companies, such as Kerjaya, at a deeply discounted price.”