KJTS latest contract win to bolster earnings visibility

PETALING JAYA: KJTS Group Bhd’s recent contract win could lead to more opportunities for the group to provide cooling energy services to other real estate investment trusts (REITs) in the country.

This could be extended to its other operating markets, including Singapore and Thailand.

The contract provides positive earnings accretion, further adding to KJTS’s recurring income and long-term earnings visibility, said CIMB Securities Research.

CIMB Research is positive on the contract win given that it further strengthens KJTS’s long-term order book visibility for 20 years.

It maintains its “buy” call on the stock with a target price of RM1.30 a share.

The shares of the firm closed at RM1.07 in yesterday’s trading. KJTS has secured a 20-year service agreement contract with KIP-REIT.

Involving seven shopping mall sites across Malaysia, the contract covers the provision of retrofit works, operation and maintenance (O&M) services for the chiller plants and the supply of chilled water.

Since all seven sites are shopping malls and based on a 12-hour demand for chilled water at each site, its conservative estimate is that the total variable payment on an annual basis could reach 30% or RM7.6mil of total retrofitting charges.

The total annual fee (fixed plus variable) is estimated to amount to RM8mil.

This will result in a total contract value of RM160mil across the 20-year tenure.

The seven malls are all current KIP Mall locations under KIP-REIT and are among the total of 10 retail properties that KIP-REIT owns.

The retrofitting works on all seven sites begin on April 1, 2025 and are scheduled for completion by Dec 31, 2025.

Subsequently, O&M services and chilled water supply will commence on Jan 1, 2025.

This will continue until Dec 31, 2045.

Under this contract, KJTS guarantees a 15% reduction in energy costs for the chiller plants post-capital expenditure recovery, alongside lower carbon emission and enhanced energy efficiency.

KJTS will finance the capital expenditure required for the retrofit works on the chiller plants of these seven sites amounting to RM25.3mil.