PETALING JAYA: RHB Research is confident that Kerjaya Prospek Group Bhd (KPG) can achieve its orderbook target of RM1.5bil for the financial year ending Dec 31,2020 (FY20), given that it has already secured RM990mil in new orders for the year.
Despite the challenging environment, the research house said that KPG is maintaining its orderbook replenishment target with aggressive tendering of more than RM3bil, of which 15% is for infrastructure work, while the remainder is mostly for property buildings.
“Meanwhile, its construction orderbook stands at RM3.7bil, which should keep the company busy in the next three to four years, ” RHB Research said.
The research house is keeping a buy call on KPG with a 24% upside in its target price of RM1.25.
However, it believes the stock is trading at an undemanding 7.8 times price-to-earnings ratio.
“In our view, it is being unfairly overlooked by the market, ” it said.
Although KPG has restarted work on almost all projects after the easing of restrictions of the movement control order (MCO), RHB Research said work is likely to normalise after a month of post-MCO operations.
“Nonetheless, progress remains slow due to supply chain disruptions. On that note, Covid-19 testing for KPG’s foreign workers is still ongoing, with around 40% completion recorded, ” it said.
On the other hand, it noted that KPG aims to improve its operational costs through the reduction of building material prices in the market.
“We understand the company is able to enjoy favourable rates due to the slowdown in demand and its ability to pay cash for supplies. In particular, KPG is expecting 5% and 3% declines in steel bar and ready-mixed concrete prices.
“According to management, there is no pressing need to cut workers’ remunerations in the immediate term, ” RHB Research said.
On a positive note, it pointed out that KPG’s dividend payout ratio is expected to be maintained at 35% compared to a minimum payout policy of 25%.
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