Newsbreak

• KJTS secures 20-year contracts with Centel. KJTS, through its Thailand subsidiary KJTN Engineering, has entered into four agreements with wholly-owned subsidiaries of Central Plaza Hotel Public Company Limited (Centel) for retrofit works, opertation and maintenance (O&M) services and chilled water supply at four hotels in Thailand. The retrofit works are expected to commence in Sep 2026 and complete by Feb 2027, followed by 20 years of O&M and chilled water supply from Mar 2027 to Feb 2047. The agreements carry aggregate fixed fees of THB393.8m, equivalent to c.RM47.8m over 20 years, excluding variable fees based on chilled water supplied.

M+ Global View

• Strengthening recurring revenue stream. We view the latest contracts positively as they further expand KJTS’ recurring Energy Services base. Based on the fixed fees alone, the four contracts should contribute c.RM2.0m of revenue in FY27f, assuming operations commence as scheduled in Mar 2027, and c.RM2.4m on a full-year basis from FY28f onwards. This excludes variable fees linked to chilled water consumption, which provide additional upside to our estimates.
• Deepening Thailand customer relationships. The latest awards further strengthen KJTS’ Energy Services footprint in Thailand and deepen its relationship with Central Group. KJTN Engineering has an established working relationship with Centel, having previously undertaken three cooling projects for the group. We view the repeat wins positively, as they highlight KJTN Engineering’s track record in delivering cooling projects and provide scope for further cross-selling opportunities within the customer base.
• Favourable earnings mix shift. The new contracts are supportive of KJTS’ ongoing transition towards a larger Energy Services contribution, which accounted for 72.0% of Group revenue in 1H26 versus 56.5% in 1H25. We believe the combination of long-duration O&M income and chilled water supply should further improve earnings visibility, while the variable fee component provides scope for revenue upside as chilled water demand increases.
• Upfront funding requirements. KJTN will fund c.RM7.1m of retrofit works across the four hotels and is required to subsequently acquire c.RM4.1m of employer-funded retrofit works under the three DBO agreements, bringing its total funding requirement to c.RM11.2m. The commitments will be funded through internally generated funds and/or bank borrowings. While this requires upfront capital deployment, the investment underpins a 20-year stream of recurring O&M and chilled water income.

Valuation & Recommendation

• Forecast. We raise our FY26f/FY27f earnings forecasts by 33.2%/5.1% to RM26.6m/RM28.4m, respectively, and introduce our FY28f earnings estimate of RM31.2m. This implies a 3-year earnings CAGR of 20.1% over FY25-FY28f. The sharp upgrade to FY26f reflects the stronger-than-expected 1H26 earnings performance, underpinned by stronger Energy Services momentum and the ramp-up of recently secured contracts, while the FY27f revision incorporates the higher earnings base and contribution from the latest Centel contracts.
• Reinstate BUY with a higher TP of RM1.23 from RM0.87, implying 12.8% upside,derived from an unchanged 30x P/E multiple applied to our FY27f EPS of 4.11 sen, rolled over from our previous valuation based on FY26f EPS.
• Downside risks. Risks to our recommendation include: (i) KJTS’s inability to replenish its order book; (ii) changes in TNB’s tariff policies; and (iii) potential contract terminations by its customers.