KUALA LUMPUR (Aug 18): Construction firm Kerjaya Prospek Group Bhd non-independent, non-executive chairman Datuk Tee Eng Ho said the political stability arising from the outcome of the just-concluded six state elections is set to be a major tailwind for the local economy moving forward, which will boost the group’s prospects.
“Prospects for the group in the next six months will be better due to political stability [in Malaysia]. Hence, the worst is over,” Tee said at a briefing on the group's results for the second quarter ended June 30, 2023 (2QFY2023).
His optimism is also fuelled by his view on the overnight policy rate. “Our interest rate [is] almost high already. Even [if it goes] up, [at] maximum [it] will be another 25 basis points. But, I do not think it will go up anymore," he said.
According to him, these factors would encourage foreign direct investment in the country which may boost construction activity and therefore bring more jobs for the group.
In 2QFY2023, the group’s net profit rose 10.6% year-on-year (y-o-y) to RM31.57 million from RM28.54 million, as it posted a record quarterly revenue for the quarter under review.
Revenue grew 11.7% y-o-y to RM309.28 million compared to RM276.92 million, due to improved progress of construction work activities, its bourse filing showed on Friday (Aug 18).
For the six months ended June 30, 2023 (6MFY2023), Kerjaya Prospek’s net profit rose 6.2% to RM60.98 million, from 6MFY2022’s RM57.4 million. Revenue also increased 5% to RM606.52 million from RM577.51 million during the same period a year earlier.
It had declared a second interim dividend of two sen per share, payable on Oct 6, 2023. This brings its total proposed dividend year-to-date to four sen per share, higher than three sen per share in the corresponding period last year.
Meanwhile, Tee said the group is on track to achieve its new order book win target of RM1.2 billion after it clinched a total of RM983.8 million worth of contracts so far this year.
Of the RM983.8 million, RM404.4 million is for a high-rise residential project in Kuala Lumpur from BCM Holdings Sdn Bhd (a subsidiary of Ecofirst Consolidated Bhd), RM398 million is for the construction of coastal protection structure for phase 2B and 2C at Andaman Island for Tanjung Pinang Development Sdn Bhd, and RM135.4 million is for a 21-storey building development project from BBCC Development Sdn Bhd.
Another RM24.7 million is for developing earthworks and drainage for a mixed development in Shah Alam from Eastern & Oriental Express Sdn Bhd, and the remaining RM21.3 million is for infrastructure works for Seri Tanjung Pinang Phase 2A Development in Penang from Persada Mentari Sdn Bhd.
The group also has an outstanding order book of RM4.5 billion for construction contracts as at June 30, 2023.
On raw material prices, Tee said concrete prices, which had been on the uptrend since the beginning of last year, had increased by 40% so far. However, Tee said the group’s profit margin will not be affected going forward as the contract value for new projects will increase in tandem with the surge in raw construction material costs.
The group’s net profit margins stood at 10.21% as at 2QFY2023, slightly improved from 9.9% in 1QFY2023.
Pre-pandemic, the group used to enjoy a better net profit margin of 13.3% in FY2019. It fell to 11.17% in FY2020 and further eroded to 9.92% in FY2021 before it rebounded to 10.21% in FY2022.
Kerjaya Prospek's share price closed unchanged at RM1.20, giving the group a market capitalisation of RM1.52 billion.