KUALA LUMPUR: Kerjaya Prospek Group (KPG) Bhd, which just bagged its third construction job for this year, has gotten analysts upbeat about its earnings prospects for 2022.
RHB Investment Bank, in a report yesterday, said it is adjusting KPG’s 2022 to 2024 earnings upwards by 2%, 1% and 2% respectively.
“We revise our 2022 job assumptions to RM1.6bil from RM1.2bil. Meanwhile, we leave our job replenishment assumptions for 2023 and 2024 unchanged at RM1bil and RM800mil.
“With more than eight months before the year ends, we think that KPG still has room to win more contracts given its net cash position as at the fourth quarter of 2021.”
TA Research, meanwhile, is maintaining KPG’s 2022 to 2024 earnings forecasts as the latest job win is within the research house’s 2022 order book replenishment assumption of RM1.4bil.
“Assuming a gross margin of 11%, the project is estimated to generate RM21.2mil of net earnings throughout the construction period,” said TA Research.
KPG had announced on Wednesday that it had secured a RM265mil contract from Persada Mentari, an indirect subsidiary of Eastern & Oriental Bhd.
The contract entailed the main building works for a proposed residential development project in Penang.The proposed development project is expected to commence on July 1, 2022 for a period of 32 months.
According to RHB Investment Bank, the latest contract win has raised KPG’s construction order book to RM4.4bil.
“This translates into an order book/revenue cover ratio of 4.6 times, higher than the average of 2.5 times of listed contractors under our coverage.
“More importantly, this third job award brings the year-to-date job wins just RM27mil shy of the group’s job replenishment target of RM1.2bil for this year.”
On another development, RHB Investment Bank said KPG could face potential raw material price headwinds.
“The group acknowledged headwinds in the form of elevated raw material costs, namely the prices of steel bars and concrete which have risen by 10% and 30% since the start of this year.”
Moving forward, the research house said KPG might resort to pricing in the increased input costs accordingly into new tenders to prevent margin erosion.
“Other efforts include leveraging on its strong cash position to negotiate with suppliers to obtain more favourable prices,” it said.
KPG’s net profit for its fourth quarter ended Dec 31, 2021, rose to RM30.39mil from RM27.98mil in the previous corresponding period.
Revenue in the fourth quarter grew to RM283.72mil from RM248.85mil a year earlier.For its financial year ended Dec 31, 2021, the group’s net profit increased to RM96.96mil from RM90.76mil in the previous corresponding period, while revenue improved to RM964.93mil from RM811mil a year earlier.
The group has declared an interim dividend of two sen per share, to be paid today.