CGSI Research said new contracts secured by Kitacon could serve as a share- price catalyst.
PETALING JAYA: The key rerating catalysts for Kumpulan Kitacon Bhd
are improving earnings and margin trajectory, and large contractors outsourcing internal property projects.
CGS International (CGSI) Research noted Kitacon trades at 6.6 times 2025 price earnings ratio (2.6 times ex-cash) versus the sector average of 19 times.
The research house noted the valuation overly discounts Kitacon’s well-managed operations, clean balance sheet and robust return on equity of 15.8% to 16.7% in financial year 2025 (FY25) and FY26.
It reiterated its “add” call on the stock with a target price of RM1.43 a share.
The downside risks cited for its call on Kitacon include delays in project awards, and rising raw material cost.
Kitacon recently won a residential project worth RM86.6mil, bringing year-to-date contract wins to RM750mil, and it is on track to meet CGSI Research’s target of RM1bil wins in FY25.
The contract was awarded by Earth Pavillion Sdn Bhd, a subsidiary of Bandar Raya Developments Bhd, and is for the construction of three-storey houses in Senja, a high-end development in Seri Kembangan, Selangor.
Kitacon’s continued involvement in Senja is positive and reinforced the company’s expertise in executing premium landed projects, the research house noted.
While there is no margin guidance for this new contract, CGSI Research expected margins to be comparable with the past few quarters (gross profit margins of 14.6% to 15.6% for fourth quarter 2024 to 2Q25).
Construction is scheduled to commence in November and expected to be completed in November 2027.
CGSI Research said new contracts secured by Kitacon could serve as a share- price catalyst.
As of Oct 25, Kitacon’s order book remained resilient at RM1.3bil, with a tender book of RM1.26bil, including with key clients such as Sime Darby Property and S P Setia Bhd.
The ongoing launches by Kitacon’s key clients for their existing township developments could offer recurring contract opportunities for contract wins, it added.
