Growth seen for KJTS despite share issuance

PETALING JAYA: KJTS Group Bhd’s proposed issuance of shares to new bumiputra investors will result in share dilution, say analysts.

The issuance of 102.1 million shares – along with the eligible employee share option scheme exercised by 2026 – will dilute KJTS’ earnings per share (EPS) for the financial year 2026 (FY26) and target price by 13%, according to Kenanga Research.

The special issue, which is a prerequisite for KJTS’ Main market transfer, would lower the target price to RM1.84, from RM2.12 projected currently.

KJTS plans to issue new shares of up to 12.5% of its enlarged share base at an indicative price of RM1.42 per share, raising RM145mil.

It is targeted for completion by the fourth quarter of FY25.

The new shares will be issued to bumiputra investors identified and approved by the Investment, Trade and Industry Ministry (Miti).

CIMB Research said this exercise is aimed at fulfilling the bumiputra equity condition tied to KJTS’s ACE Market listing in Jan 2024.

The condition requires that 12.5% of the group’s enlarged issued shares to be allocated to Miti-approved bumiputera investors either within one year of achieving the Main Market profit requirements, or within five years of ACE Market listing, whichever occurs first.

Having met the Main Market profit requirement (collective core net profit of RM20mil across three financial years) based on audited FY24 accounts, KJTS must now comply with the bumiputra equity condition by end of December 2025.

The net proceeds from the issuance will primarily fund expansion of its cooling energy segment and working capital, with the remainder allocated to debt reduction.

By segment, the cooling energy segment remained the largest contributor in the first half of FY25, accounting for 56.5% of KJTS’ revenue, followed by cleaning services and facilities management.

“Pending completion of the issuance, we keep our forecasts unchanged, reaffirm our street-high target price of RM2.12 and ‘outperform’ call.

“KJTS remains our top energy efficiency or renewable energy pick,” said Kenanga Research.

Meanwhile, CIMB Research said it has maintained its FY25 to FY28 EPS forecasts, “buy” rating, and target price of RM1.85 on KJTS.

It added that KJTS trades at a 2027 price-to-earnings ratio of 25 times, which is at 20% premium to global cooling energy peers.

“We continue to like KJTS for its strong growth prospects, supported by Malaysia’s National Energy Transition Roadmap (NETR); robust earnings growth; and scarcity premium as Bursa Malaysia’s only listed NETR-focused energy efficiency stock.

“In addition, optionality from the Stonepeak joint venture (JV) remains an unpriced catalyst as the potential for Stonepeak to acquire value-accretive cooling energy assets locally could provide further upside optionality to the investment case, which we have yet to incorporate into our forecast.”

KJTS has a 10% stake in the JV.