Kerjaya Prospek Group Bhd - Related-Party Contracts Bolsters Order Book
Thu, 21-May-2026 07:33 am
by Tan Wai Wern • Apex Research

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KERJAYA (7161)

Target Price (RM)

3.10

Recommendation

Buy

  • KERJAYA secured 2 contracts worth a cumulative RM102.6m from related parties for projects on Andaman Island, Penang.

  • Assuming a PBT margin of 13%, the contracts are expected to contribute a total of c.RM13.3m (or 4.3% of FY26F PBT) over FY26F-FY28F.

  • Maintain BUY with an unchanged TP of RM3.10, based on 15.0x PE applied to FY27F EPS of 20.6 sen, alongside a three-star ESG rating. 

 

Order Book Boosted by Two Related-Party Construction Contracts. KERJAYA clinched two related-party construction contracts collectively valued at RM102.6m for projects located on Andaman Island, Penang. Both contracts were awarded by Persada Mentari Sdn Bhd (PMSB), an indirect subsidiary company of Eastern & Oriental Berhad (E&O).

 

Building Works Contract. Kerjaya Prospek (M) Sdn Bhd (KPM), a wholly-owned subsidiary of KERJAYA, was awarded a RM69.6m building works contract from PMSB. The contract involves the construction of 28 units of 3-storey terrace houses and 18 units of 3-storey semi-detached houses on Section 2 of Andaman Island. Works is slated to commence on 1 August 2026 and is expected to be completed within 24 months from the commencement date.

 

Piling and Earthworks Contract. KPM secured a RM33.0m piling and earthwork contract from PMSB for a proposed serviced apartment development at Bandar Tanjung Pinang. The contract comprises of the execution and completion of the foundation piling system and pile caps, basement construction, 2 levels of lower ground construction alongside associated site works. The project is scheduled to begin on 1 July 2026 and span 12 months.

 

Our View. We view these contract awards positively, as they bring KERJAYA’s total contracts secured in FY26 to six. Based on an estimated 13% PBT margin, the projects will collectively contribute c.RM13.3m throughout its construction period, representing c.4.3% of our FY26 forecast. Following the latest wins, KERJAYA’s YTD contract wins have increased to RM1.1bn, lifting its outstanding order book to RM4.4bn. This translates into a solid book-to-bill ratio of 1.8x based on our FY26F revenue forecast, providing strong medium-term earnings visibility. We estimate that 50% of the Group’s outstanding order book is concentrated within the Andaman Island, which support margins through lower mobilisation, procurement and labour costs.

 

Outlook. We expect KERJAYA to continue delivering resilient earnings performance despite prevailing macroeconomic uncertainties, supported by its sizeable outstanding order book and recurring flow of related-party developments. Assuming annual combined gross development value (GDV) launches of RM3.0bn, together with a 50% construction-to-GDV conversion ratio, the Group could secure RM1.5bn worth of related-party contracts annually, providing a strong foundation for sustainable order book replenishment. In addition, management aims to gradually rebalance its project mix toward 35% external and 65% internal jobs. We view this strategy favourably as it enhances client diversification while reducing reliance on related-party projects over the longer term. Concurrently, the Group is also expanding its participation in infrastructure-related segments such as industrial facilities, data centres and commercial developments, which could serve as additional growth catalysts amid rising demand for specialised construction works.

 

Earnings Revision. We make no changes to our earnings forecast as the award falls within our orderbook replenishment assumption of RM1.8bn for FY26.

 

Valuation & Recommendation. Maintain our BUY rating on KERJAYA with an unchanged TP of RM3.10, based on a 15.0x PE applied to FY27F EPS of 20.6 sen, alongside a three-star ESG rating.

 

Risks. Rising material costs, labour shortages and oversupply of high-rise residential projects in the property sector.

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