KUALA LUMPUR (March 26): KJTS Group Bhd (KL:KJTS) rose on Thursday to its highest in more than a month following entry of a state investment firm into its district cooling joint venture.
The investment by Retirement Funds Inc, the pension fund also known as KWAP, will allow Lestari Cooling Energy Sdn Bhd to take on larger projects, as well as provide access to government-linked projects, Kenanga Investment Bank and CIMB Securities said.
“KJTS stands to benefit from potential projects deployed,” including construction work and long-term operations-and-maintenance income, in addition to recurring income from energy efficiencies, Kenanga said.
Shares of KJTS climbed as much as six sen or nearly 8% to 82.5 sen on Thursday, its highest since Feb 20. At 10.45am, KJTS was trading at 82 sen as more than one million shares changed hands. At the last price, the company had a market capitalisation of RM566 million.
On Wednesday, KJTS announced the addition of KWAP as a 30% investor in Lestari Cooling, the company’s existing joint venture with American investment firm Stonepeak. KWAP is expected to commit up to about RM190 million through its climate-focused initiative Dana Iklim+.
Stonepeak will control the majority 60% in Lestari Cooling, while KJTS retains a 10% stake. Lestari Cooling is expected to be capitalised at up to RM1.5 billion and will focus on developing district cooling and electricity distribution assets in Malaysia.
“We view KWAP’s entry as a clear positive for KJTS,” CIMB Securities said. “The JV structure enables KJTS to pursue larger concession-style district cooling opportunities without meaningful balance sheet strain”, as capital expenditure is funded at the joint venture level, the research house added.
Shares of KJTS have lost about 43% of their value year-to-date after a major acquisition fell through, though a majority of research houses, including Kenanga and CIMB Securities, are bullish on the stock’s prospects over the next 12 months.
The stock has three 'buy' calls and one 'hold' call. The consensus’ target price is RM1.03, based on the average of four houses tracked by Bloomberg.