KUALA LUMPUR: Kerjaya Prospek Group Bhd (KPG) may stand to secure additional contracts from Eastern & Oriental Bhd's (E&O) proposed Andaman Island development project, also known as Seri Tanjung Pinang Phase 2 (STP2), in Penang.
RHB Research believes that STP2 could provide a continuity of job flows for KPG over the next five to seven years, estimated to be worth about RM2 billion.
STP2 is divided into Andaman Phase 1 (253 acres) and Phase 2 (507 acres). KPG was involved in the reclamation structure works of Andaman Phase 1, with a cumulative job value of about RM230 million.
"With Andaman Phase 2 yet to begin any significant reclamation works, we believe KPG stands a fair chance to do the reclamation works for this phase of STP2 along with some small connecting bridges within the said development," the firm said in a note.
KPG recently secured a job worth RM170.9 million from E&O's indirect subsidiary, Persada Mentari Sdn Bhd for STP2.
The scope includes a 38-storey service apartment block, a two-storey basement car park, a five-storey elevated car park, facilities floor, as well as the provision of wardrobe, kitchen cabinet and vanity mirror for typical units.
The project is set to be completed within 35 months from January 18, 2024.
This marks KPG's fifth successful bid from Persada Mentari and the company's 13th project related to the Andaman Island under the STP2 development in Penang."
"On further scrutiny, we learned that this job relates to the Arica project (GDV: RM400 million), which is E&O's second serviced residence project at Andaman Island after The Meg.
"This brings KPG's latest outstanding orderbook to RM4.5 billion, translating to earnings visibility of up to four years," it said.
RHB said the RM170.9 million job makes up 11 per cent of the firm's FY24 job replenishment target of RM1.5 billion for KPG.
In total, KPG has secured RM1.7 billion (effective share) and RM1.4 billion worth of contracts under STP2 and other developments related to the Batu Kawan area.
RHB made no changes to KPG's earnings estimates as the latest job win is within its FY24 job replenishment assumption.
Separately, RHB views KPG's partnership with Samsung C&T as enabling it to leverage industrial building jobs amid the country's foreign direct investment growth.
The firm is keeping a buy call on KPG with a new target price of RM1.75, an 11 per cent upside, and six per cent of its FY24F yield.
RHB said that the rerating catalysts are based on the company securing jobs beyond STP2 in Penang, especially in Batu Kawan, and larger-than-expected wins from the industrial space.