PETALING JAYA: KJTS Group Bhd
’s recent contract wins and joint venture (JV) have given it larger opportunities for further business expansion in the coming years.
The integrated building support services provider recently secured a contract from KIP-Real Estate Investment Trust (REIT) to provide retrofit works, operations and maintenance (O&M) services, as well as a chilled water supply for seven of the retail property trust’s shopping malls.
CIMB Research said this win could lead to more opportunities for KJTS to provide cooling energy services to other REITs in Malaysia and in its other operating markets like in Singapore and Thailand.
It added KJTS has been in talks with two other REIT’s in the country so far.
“According to KJTS, its solutions in the cooling energy segment can help REITs to drive cost savings from lower energy usage, reduce carbon footprint, and monetise their cooling energy assets by selling these assets to KJTS for more effective capital allocation,” CIMB Research said.
The research house added the estimated total value for the 20-year contract is between RM148mil to RM188mil, comprising a fixed base fee and charges for chilled water supply as well as O&M services.
Another highlight for the group according to CIMB Research is the JV with Stonepeak Partners LP.
The JV aims to develop, upgrade, invest in and own cooling infrastructure assets in Malaysia to produce chilled water for distribution to off-takers on a long-term basis, thereby generating recurring income.
The collaboration is expected to leverage KJTS’s expertise in cooling energy assets, given its position as an integrated service provider in the segment with an established track record.
“The JV has identified a target list of cooling energy assets in Malaysia investment and acquisition that includes key national assets that have strong potential to lower carbon footprint and lower energy costs.
“This list forms the basis of KJTS’s target of RM1.5bil, set to be deployed within three to five years,” it noted.
CIMB Research said KJTS views this JV as a major game changer, as it can benefit from its role as the JV’s EPC and O&M contractor for all investments, leading to higher demand for its cooling energy services, and earnings accretion via its 10% stake in the JV.
Meanwhile, on KJTS’s earnings side, the research house said the commencement of new engineering, procurement, construction, and commissioning (EPCC) projects in the cooling energy management segment led to higher revenue.
However, with a lower earnings before interest, tax, depreciation, and amortisation margins, its net profit decreased slightly to RM4.4mil.
In the fourth quarter of 2024 (4Q24), 75.6% of its revenue came from recurring income, with the remainder generated from EPCC projects.
“We note that the recurring portion of its top line in 4Q24 was 0.8 percentage points lower quarter-on-quarter reflecting the project progress of several major newly secured EPCC contracts in the quarter,” it said.
As for the largest contributor to KJTS revenue, Malaysia came out top, accounting for 67.8%, followed by Singapore at 18.2% and Thailand at 14%.
