KUALA LUMPUR (Nov 26): Construction firm Kerjaya Prospek Group Bhd is confident it will be able to sustain its double-digit profit after tax (PAT) margins until next year, supported by lower material costs, despite the pandemic-caused slowdown in the construction sector.

Its executive chairman Datuk Tee Eng Ho said pricing for materials such as cement and concrete has come down due to lower demand since the pandemic hit.

“We can achieve double-digit margins not just because of the lower material cost, but also by how we manage our projects and keep costs low. In fact, Kerjaya Prospek’s administration cost is only about 3.8% [of its total revenue], being one of the lowest in the town,” he told a virtual press briefing on the group's results for the third quarter ended Sept 30, 2020 (FY20), today.

For the nine months ended Sept 30, 2020 (9MFY20), the group’s PAT margin stood at 11.2% — still a double-digit, albeit down from the 13.2% it registered a year ago — due to higher costs incurred for complying with the standard operating procedures set by the government to curb the spread of Covid-19.

The group's PAT margin has ranged between 12.4% and 13.3% in the past four years of FY16 to FY19.

The group's net profit for the third quarter ended Sept 30 (3QFY20) rebounded to RM30.38 million, three times the RM10.06 million it recorded in the preceding quarter of 2QFY20, as the group resumed its construction projects. Revenue grew 73.5% to RM222.21 million from RM128.1 million.

Cumulative net profit for 9MFY20 came in at RM62.77 million, down 39.6% from RM103.91 million in 9MFY19, as revenue fell 28.6% to RM562.15 million from RM786.87 million.

The group has proposed an interim dividend of 1.5 sen per share, amounting to RM18.49 million, that will be paid on Jan 6, 2021.

Following the strong earnings recovery seen in 3QFY20, Tee said the group’s earnings should be sustainable at that level for the next few quarters, backed by its outstanding orderbook of RM3.6 billion as at Sept 30, which is expected to be recognised over the next three years.

Recovery to pre-pandemic earnings level, such as the one recorded in FY19, however, will only be seen in FY22, Tee said, as he expects the on-going pandemic to continue to weigh on the construction industry, thus impacting the group’s performance in FY20 and FY21.

The group reported its highest ever profit after tax of RM140.14 million in FY19 on revenue of RM1.06 billion.

Tee added that he anticipates the industry to only recover in the second half in 2021, on the assumption that the pandemic would have eased off by then with vaccines to curb further spread of the coronavirus made widely available.

Kerjaya Prospek shares closed 1.5 sen or 1.62% higher at 94 sen, bringing its market capitalisation to RM1.16 billion. It saw some 693,300 shares traded.