KUALA LUMPUR (Aug 4): District cooling provider KJTS Group Bhd (KL:KJTS) could benefit from Malaysia’s pivot towards the Energy Efficiency and Conservation Act (EECA), which came into force this year, said Kenanga Research.

The group’s plan to acquire KL Sentral district cooling and electricity distribution firm Malakoff Utilities Sdn Bhd (MUSB), plus its joint venture push with Stonepeak Partners LP in the same sectors, are seen as early steps towards securing long-term projects and opportunities in government assets, said the research house in a note.

“We estimate a total addressable market of RM41 billion for Malaysia’s cooling energy space, where KJTS is well positioned to capture the cusp of this structural uptrend, just like solar stocks in their breakout rally,” said Kenanga, which initiated coverage of the stock with a target price of RM2.12.

Under the EECA, as many as 1,500 energy consumers in the industrial segments,are expected to improve energy intensity to meet regulations in the next five years. This will also cover government buildings and eventually as many as 4,100 hotels and hospitals in the future. 

For KJTS, The real value in its joint venture with Stonepeak’s affiliate to pursue district cooling and electricity distribution assets “lies in the 20-year recurring income stream” and how the bulk of the upside could flow “directly to KJTS’s bottom line”.

This as KJTS is appointed the exclusive engineering, procurement, construction, commissioning, operations and maintenance provider for all joint-venture projects.

Further, the RM65.5 million MUSB takeover includes a target to increase profit by at least fivefold to RM10 million, and positions KJTS as a front runner to grab a chunk of the RM5b public-sector retrofit market, covering at least 284,500 RT cooling capacity, Kenanga said.

Operating in Malaysia, Singapore and Thailand, KJTS was part of global energy efficiency giant Dalkia Group, but taken private by its management following Dalkia’s regional exit in 2014. It also provides facilities management and cleaning services.

The group posted its best quarter in the three months ended March 31, 2025 (1QFY2025), with net profit of RM4.23 million or 0.61 sen per share, on revenue of RM46.55 million.

At the time of writing on Monday, the counter had risen 12 sen or 9.09% to RM1.44, giving it a market capitalisation of RM991.89 million.