PETALING JAYA: Kerjaya Prospek Group Bhd
’s proposed joint venture (JV) to undertake a mixed development project in Penang is expected to strengthen its property development capabilities.
The project is also expected to have a positive impact on the company’s earnings despite the large capital outlay.
Most brokerages remain positive on their outlook for Kerjaya, with the four polled by StarBiz reiterating their “buy” or “outperform” ratings on the counter.
Kerjaya on Monday announced it had entered into a 55:45 JV with Aspen Vision Development to develop a mixed project on a 36-acre land in Seberang Perai Tengah in Penang. The project comprises 338 affordable houses, 1,680 residential units, 1,680 serviced apartments, commercial retail shops and offices.
RHB Research said in its report that it was upbeat on such developments, as it would expand Kerjaya’s property arm, whose projects in the Klang Valley have a total gross development value (GDV) of around RM800mil.
The brokerage raised its 2025 and 2026 earnings forecasts for Kerjaya by 3% and 5%, respectively, to impute contributions from this upcoming proposed project (including a 15% after-tax profit margin).
It, however, made no changes to its 2024 earnings forecast for the company because construction works for the project might only start at the end of the year.
RHB Research raised its target price for Kerjaya to RM2.67 from RM2.57 previously.
“We like Kerjaya for its robust job flows in Penang and the Klang Valley, which underpin the group’s three-year (2023-2026) earnings compounded annual growth rate of 14%,” it said.
TA Research stated in its report that it viewed Kerjaya’s new partnership with Aspen positively, as it aligns with Kerjaya’s strategy to strengthen its property development capabilities over the coming years. The project also supports the company’s timely landbank expansion efforts.
The brokerage expects the new project to contribute significantly to Kerjaya’s earnings by 2026, assuming a launch in 2025. It maintained its target price for the counter at RM2.79.
Phillip Capital Research noted the new joint-venture development would increase Kerjaya’s GDV land bank by two-fold to RM1.6bil to RM1.8bil.
“We lift our 2025-2026 earnings forecast by 2%-8% after raising our property division’s GDV assumption from this joint-venture,” the brokerage said.
“We remain positive on Kerjaya’s earnings prospects, underpinned by its robust contract flows,” it added.
Phillip Capital Research kept its target price for Kerjaya unchanged at RM2.65.
Meanwhile, Kenanga Research said while the joint venture is expected to be accretive to construction profits and property earnings, large capital outlay for the project might shift Kerjaya from a net cash position to net debt, assuming consolidation for its 55% stake in the partnership.
As of June 2024, Kerjaya had a net cash position of RM231.4mil.
“Assuming a RM2bil GDV, with 70% debt funding, Kerjaya would need to consolidate RM1.4bil debt onto its balance sheet, resulting in net debt of RM1.17bil or one-time net gearing,” Kenanga Research explained.
“On a positive note, the cash payments for the land purchase are structured over five instalments, that is, RM1.08mil as an advance payment, RM4.3mil in 12 months, RM13.1mil in 24 months, RM10.1mil in 36 months and RM25.5mil in 84 months. This should help to alleviate near-term cash flow pressure,” it added.
Kenanga Research revised its target price for Kerjaya to RM2.21 from RM2.24 previously.
