KUALA LUMPUR (Jan 13): PublicInvest Research has initiated coverage of Kerjaya Prospek Group Bhd (KPGB) with an “outperform” rating at RM1.18 and target price (TP) of RM1.69 and said the group has consistently achieved stable, double-digit net profit margins (except 2021 due to the Covid-19 pandemic) and maintained a net cash position under the current management’s leadership.

In a note on Friday (Jan 13), the research house said with the residential construction segment potentially looking lackluster in 2023 as property market demand may weaken, it said KPGB will be able to avert this by focusing and building their way out of residential high-rise into commercial buildings.

PublicInvest said property launches were subdued in 2022 as developers deferred launches due to high building materials cost, labour shortage and weakened demand.

“However, we notice the overhang situation has improved slightly, down 7.5% y-o-y and 4.6% y-o-y in volume and value as developers have been actively clearing their completed inventories.

“Moving forward, we think developers will start ramping up development to replenish its depleting inventories and meet housing demand beyond 2023 as construction of high-rise buildings may require approximately 2-3 years,” it said.

The research house said the current financial year (FY2022) is expected to see a 19.7% y-o-y increase in net profit compared to FY2021 on the back of higher revenue.

“Excluding the pandemic years of 2020 and 2021, 9MFY2022 revenue growth is higher by 6.4% in comparison with 9MFY2019 revenue growth due to stronger construction earnings recognition as projects were either more than 50% completed or at the tail end.

“Meanwhile in FY2023, core earnings are expected to grow 24.4% y-o-y on the back of an RM1.0 billion order book replenishment, lower cost of sales by 0.6% and an 11.0% reduction in finance cost,” it said.