KJTS’ cooling story loses heat

WHEN KJTS Group Bhd got listed two years ago at an offer price of 27 sen a share, the stock enjoyed phenomenal interest.

Its initial public offering (IPO) was sought after by investors, oversubscribed by 31.28 times.

Its share price spiked by 85% on the very first day of trading on the ACE Market on Jan 26, 2024. The stock didn’t stop rising, hitting an all-time high of RM1.73 on Aug 15, 2025.

At its peak, CIMB Securities was calling a “buy” with a target price (TP) of RM1.85 and Malacca Securities had initiated coverage with a “strong buy”, predicting the stock would hit RM1.80.

Today, the stock trades at about 74 sen, down almost 50% year-to-date. So, what happened?

In KJTS’ case, it seems to be more of a case of the market just expecting too much.

At its peak price of RM1.73, the stock traded at a historical price-to-earnings (PE) multiple of around 70 times, but at a prospective PE of close to 50 times based on analysts forecasts earnings.

The company, which specialises in district cooling systems, did enjoy some level of earnings growth, but it did not meet expectations that the market had placed on it.

KJTS’ attraction lies in the fact that it isn’t just another facilities services company.

It specialises in large-scale centralised cooling energy systems, which is a growing market globally because of rising electricity costs, sustainability goals, and demand from big commercial users like malls and data centres.

KJTS also has recurring income from long-term contracts and is a beneficiary of Malaysia’s energy efficiency and net-zero goals.

Today, CIMB Securities’s “buy” call remains but with a TP of RM1, based on a forward PE of 25 times KJTS’ calendar year 2027 earnings.

The research house notes that this valuation is still at around a 20% premium to global cooling energy peers.

Malacca Securities, in its most recent report on the company, has cut its TP to 87 sen.

Since its listing, the company has grown both its top line and bottom line, albeit slowly. Up to the third quarter ended Sept 30, 2024, KJTS had no prior corresponding period for comparison.

The company has consistently leveled up its earnings since then – in the most recent quarter ended Sept 30, 2025, it posted RM4.59mil in profit on the back of RM58mil in revenue.

The previous quarter saw a slightly lower profit of RM4.5mil with a revenue of RM44.05mil.

More recently KJTS failed to complete the acquisition of Malakoff Utilities Sdn Bhd (MUSB) at a price tag of RM65.5mil, which was first announced in February 2025.

MUSB owns and operates a large-scale cooling system that supplies chilled water for air-conditioning to 10 major buildings within KL Sentral – something KJTS would have taken over.

But, the deal fell through due to the non-fulfilment of variousconditions precedent (CPs). It is unclear which CPs were not fulfilled and KJTS has declined to comment.

Malacca Securities’ head of research Loui Low says while the lapsed deal is significant, it doesn’t mean it will halt the company’s growth earnings.

He says there is definitely a shift in sentiment, but for most, it has zeroed back to earlier expectations of normal growth.

“We still have a positive outlook on the stock.”

Kenanga Investment Bank Bhd head of research Peter Kong says the deal was a strategic show for the company, and the bank had projected it would have contributed about RM5mil for financial year 2026 (FY26), with a full impact of RM10mil for FY27.

Kong says he does not have clarity on what the crux of the CP disagreement is, but this should stand as a reminder on execution risks on deals.

“We had a view that this deal was conducted to us at a price that looked more than reasonable, following which KJTS through retrofitting, can enhance the profits post-retrofit to deliver profits of RM10mil and more and therefore recoup,” he says.

He reckons the company has not been resting on its laurels, but has diversified its business like the agreement to pursue data centre and infrastructure-related projects with China Construction Yangtze River Malaysia Sdn Bhd.

CIMB Securities, in its Feb 6 note following the lapse of KJTS’- MUSB deal, notes that despite the earnings downgrade, the research house remains “constructive” on KJTS.

It said that this is underpinned by a few factors, including the company’s positioning as the sole proxy to benefit from the strong structural growth driven by the National Energy Transition Roadmap (NETR), robust three-year earnings per share compounded annual growth rate of 22.5%, and the scarcity premium as the only NETR-focused energy efficiency pure play listed on Bursa Malaysia.

“At this juncture, potential contract wins under its joint venture with Stonepeak remain unpriced catalysts, alongside other material standalone contract wins in the cooling energy segment.

“Any value-accretive cooling energy asset acquisitions could materially enhance KJTS’s long-term earnings profile, which we have yet to factor into our forecasts,” the brokerage says.

Recall that last March, KJTS formed a joint venture with Stonepeak, a global infrastructure investment firm, targeting up to RM1.5bil in cooling and infrastructure assets.

Malacca Securities, in its latest report, says: “The recent collaboration with China Construction Yangtze River Malaysia should provide a buffer for KJTS to at least fill the earnings gap (following the lapsing of the MUSB deal), although there is still limited information of how sizeable the deals are going to be”.

The market may want to remember that KJTS’ core business is still very much intact.

For now, KJTS is better off focusing on other prospects that are still in play.