KUALA LUMPUR: Kerjaya Prospek Group Bhd (KPG) is in the right position to secure potential job opportunities for the remainder of FY23 coming from Seri Tanjung Pinang's (STP) second development project, Arica, that has a gross development value (GDV) of RM200 million together with other property development projects.
RHB Research, in a note, said KPG's chances to secure the Arica project are high as the company is currently involved in the construction of The Meg, the first development project under STP2 for a contract value of RM265 million.
Over the years, KPG has secured several contracts related to the STP project.
Among these was a contract valued at RM154.4 million, spanning 40 months, won in September 2020 to construct a temporary coastal protection system for Phases 2B and 2C of the reclamation project.
In February this year, KPG accepted another contract for the STP development in Penang, worth RM398 million, to construct a coastal protection structure.
The contract involves Phases 2B and 2C of the STP reclamation project in Tanjung Tokong, Penang.
KPG has a tender book size of RM1.5–2 billion, comprising mainly property projects.
"In the longer run, we believe KPG could stand a fair chance to do the reclamation works for the Andaman Phase 2 of 507 acres (part of STP2) that have yet to commence any significant reclamation works," the bank-backed research firm said in a note today.
KPG was involved in the reclamation and coastal protection structure works of Andaman Phase 1 for a cumulative job value of RM380 million.
Meanwhile, jobs for industrial buildings, mainly via KPG's partnership with Samsung C&T, may likely come in the first half (1H) of 2024, RHB Research noted.
KPG has also secured a subcontract worth RM203 million from Samsung C&T, a 70-30 joint venture, for the concrete structure works of a factory in Batu Berendam Melaka.
"Profitability-wise, we expect the job to fetch a net earnings margin of 10 per cent.
"Our observation suggests this job relates to the Texas Instruments factory, whereby the main contract worth RM1.4 billion was awarded to the Samsung-KP JV in October 2022," RHB Research said.
RHB Research maintained a 'Buy' call for KPG and revised its FY23-FY25 earnings upwards by 1-4 per cent as the firm tweaked its FY23 job replenishment assumptions to RM1.5 billion from RM1.3 billion based on the aforementioned job opportunities.
"As a result, we arrive at a new target price of RM1.56 from RM1.50 previously, incorporating a zero ESG premium or discount based on our in-house environmental, social, and corporate governance (ESG) proprietary scoring.
"With a plethora of bright prospects underpinning its job replenishment trends, we view the stock to be undervalued at 9.9x FY24 price-to-earnings (P/E) ratio, or trading -1.5SD from the Bursa Malaysia Construction Index's 5-year mean," RHB Research said.