PETALING JAYA: KAF Investment Bank Research expects KJTS Group Bhd
’s three-year core net profit to grow on a compounded annual growth rate of 49.9%, with a substantial share of its earnings coming from recurrent revenue stream.
The company is also expected to benefit from the National Energy Transition Roadmap (NETR) and can capitalise on the rapid expansion of data centres in the country.
KJTS offers engineering, procurement, construction and commissioning (EPCC) projects and cooling energy management services (CEMS).
The company was recently listed on the ACE Market and derived about half of its revenue from large-scale cooling energy systems.
It is involved in cleaning services, which contributing 39.1% to revenue for the seven-month period of 2023 (7M23). Facilities management (FM), meanwhile, accounted for 10.7% of the revenue mix.
“KJTS’s crown jewel is its recurring revenue stream, which offers long-term earnings visibility.
“In financial year 2022, an impressive 84.8% of its revenue was from long-term contracts in the CEMS, cleaning and FM segments.
“We expect further expansion of KJTS’s recurring revenue base as it secures more projects, mainly EPCC jobs,” said KAF in a report initiating coverage on the stock with a “buy” call and 78 sen target price.
According to the research firm, growth will be driven by cross-selling opportunities and its resilient business model.
“Clients seeking performance guarantees or KJTS-funded capital expenditure are inherently linked to undertaking operation and maintenance services.” it added.
On the NETR, the research firm said KJTS is an environmental, social and governance enabler to reduce companies’ carbon footprint through cooling energy systems.
“Buildings account for a sizeable 40% of global energy usage, while 59% of a building’s energy efficiency measures are linked to cooling systems,” it noted.
As of 7M23, KJTS’ presence is concentrated in three key markets – Malaysia, Singapore and Thailand.
The company made its debut on Jan 26 at an initial public offering price of 27 sen. The stock closed last Friday at 52 sen.
