PETALING JAYA: KJTS Group Bhd
’s recent joint venture (JV) provides the group a robust funding war chest to accelerate growth and secure more large contracts in a cooling energy segment.
With committed funding of up to RM1.5bil, the JV with Stonepeak Partners LP will focus on acquiring cooling energy assets for distribution of chilled water, aiming for long-term recurring income, said CIMB Securities Research.
It is estimated to contribute up to RM30mil, assuming the RM1.5bil is funded by an 80:20 debt-to-equity capital structure for its 10% stake in the JV.
KJTS had a net cash position of RM63.2mill as of end-financial year 2024 (FY24).
It will have minimal gearing (0.01 times net) post the acquisition of Malakoff Utilities Sdn Bhd (MUSB), which will be finalised by the second quarter (2Q25).
CIMB Research said it is premature to evaluate this JV’s potential earnings contribution to KJTS given the lack of details, especially on the deployment timeline of the RM1.5bil.
However, it conducted a case study using KJTS’s recent proposed acquisition of MUSB to assess the potential earnings from the JV.
KJTS had, on Feb 3, 2025, proposed to buy a 100% stake in MUSB for RM65.5mil.
MUSB could contribute RM10.2mil in net profit to KJTS in FY26 after spending RM25mil in capital expenditure (capex) for upgrading works in conjunction with MUSB’s district cooling plant.
If KJTS identifies acquisition targets with a similar profile to MUSB in terms of profit contribution and calculation, the research house estimated that the JV could acquire up to 16.6 times of such assets (inclusive of acquisition costs and retrofitting/upgrading capex.
Even under a more conservative scenario whereby KJTS records a lower net profit margin of 4.5% versus MUSB’s FY26 net profit margin of 5.4%, it estimated that KJTS could generate RM141mil in core net profit.
This is on assumption that the JV’s RM1.5bil fund is fully utilised by then and this excluded net profit contributions from KJTS’s 10% stake in the JV.
It made no changes to its FY25-FY27 earnings per share forecasts pending further updates.
It raised its target price to RM1.45 a share, based on a 24 times 2026 price earnings ratio versus 22 times previously. The shares closed at RM1.03 on Monday.
It reiterated its “buy” call on KJTS, premised on its strong growth prospects, the large captive addressable market in Malaysia, and its scarcity premium, being the sole National Energy Transition Roadmap beneficiary stock focusing on energy efficiency that is listed on Bursa Malaysia.
