PETALING JAYA: Analysts remain positive on Kerjaya Prospek Group Bhd
despite its latest contract carrying thinner-than-usual margins, saying that the construction group’s maiden mechanical and electrical (M&E) project for a data centre could pave the way for a larger presence in one of Malaysia’s fastest-growing construction segments.
Research houses maintained their bullish recommendations after Kerjaya Prospek secured a RM52.5mil subcontract to undertake civil, structural and basic low-voltage M&E works for a new 275kV consumer landing station serving a data centre in the Klang Valley.
They viewed the award as strategically more significant than its earnings contribution, citing opportunities to establish a track record in the rapidly expanding data centre market.
Kenanga Research said the latest contract broadens Kerjaya Prospek’s earnings prospects by opening a new business segment.
“We view its maiden M&E win positively which opens up future tender opportunities for Kerjaya in the buoyant data centre space,” it said, while adding that it is maintaining its earnings forecasts for the group with a target price and an “outperform” rating.
Although the expected net margin of about 6% is below the group’s usual 10% range because the project is subcontract work, the research outfit is unconcerned.
“We remain positive as this is a fast-track, six-month project that simultaneously opens up new M&E tenders in the future.
“While this contract value is relatively small, we welcome this maiden M&E contract win, opening new M&E job opportunities in the buoyant data centre space,” it said in a note to clients.
The research house noted that the award follows Kerjaya Prospek’s acquisition of a 9.1% stake in M&E specialist Sunlogy, describing the investment and latest contract as complementary steps to strengthen its position in the electrical engineering space.
The contract also lifted year-to-date job wins to RM2.15bil, close to Kenanga Research’s full-year replenishment target of RM2.3bil for Kerjaya Prospek, with the outstanding order book rising to RM5.05bil, providing earnings visibility over the next three years.
Looking ahead, Kenanga Research said the group’s tender pipeline remains healthy, supported by RM2bil to RM3bil worth of building jobs, infrastructure opportunities at Andaman Island, participation in the Penang Light Rail Transit (LRT) Package 2 tender and upcoming property launches.
RHB Research similarly retained its “buy” recommendation and RM3.19 target price, saying the contract represents an important first step for Kerjaya Prospek into the data centre ecosystem.
“In comparison with M&E contractors involved in consumer landing station construction for data centres, we view this to be a good starting point for Kerjaya Prospek to get its foot in the M&E space.
“In the grand scheme of things, the market size for M&E engineering services in Malaysia is expected to grow at a four-year compounded annual growth rate (2025-2029) of 11.9%,” it said.
RHB Research expects project margins to come in at around 6% to 7% due to greater reliance on subcontractors but believes the award is well within its earnings assumptions.
It noted that Kerjaya Prospek had now secured approximately RM2.15bil worth of new projects this year against its RM2.3bil replenishment assumption.
The brokerage added that another key catalyst would be the group’s potential involvement in major infrastructure projects such as the Penang LRT, where it is reportedly bidding for the second package through a consortium.
