KJTS Secures 20-Year Thailand Contracts, Malacca Raises Target

KJTS Group Berhad has locked in four long-term retrofit and energy services agreements with subsidiaries of Central Plaza Hotel Public Company Limited (Centel) in Thailand, marking a significant win for the Bursa Malaysia-listed company’s push into recurring energy income. The contracts, which Malacca Securities values at THB393.8 million (approximately RM47.8 million) in fixed fees alone over two decades, will run from March 2027 through February 2047 and exclude additional variable revenue tied to chilled water supply.

What KJTS Does and Why This Deal Matters

KJTS, through its Thailand subsidiary KJTN Engineering, specialises in energy efficiency and cooling solutions. The four Centel agreements cover retrofit works, operation and maintenance (O&M) services, and chilled water supply at four hotels across Thailand—each structured as a Design-Build-Operate (DBO) arrangement.

Retrofit work kicks off in September 2026 and concludes by February 2027, after which the 20-year O&M and chilled water supply phase commences. This long-duration contract structure provides what Malacca Securities calls a “strengthening recurring revenue stream” for the company, a critical shift in its earnings profile.

Revenue and Earnings Forecasts Get a Sharp Boost

According to Malacca Securities Research, the fixed fees alone should contribute RM2.0 million to revenue in fiscal 2027 (assuming operations start in March 2027), rising to RM2.4 million on a full-year basis from FY28 onwards. Crucially, the research house notes that chilled water consumption fees will add material upside beyond these fixed figures.

The impact on the group’s earnings is substantial. Malacca Securities has raised its FY26 earnings forecast by 33.2% to RM26.6 million and its FY27 forecast by 5.1% to RM28.4 million, with a new FY28 projection of RM31.2 million. This implies a three-year earnings compound annual growth rate (CAGR) of 20.1% over FY25–FY28.

Energy Services revenue jumped to 72.0% of group revenue in the first half of 2026, up sharply from 56.5% in 1H25, demonstrating the company’s successful pivot away from one-off project work toward contracted, recurring services.

Capital Requirement and Funding Plan

KJTN Engineering must fund approximately RM7.1 million of retrofit works and acquire RM4.1 million of employer-funded retrofit assets under the DBO structure, bringing total capital deployment to RM11.2 million. The company intends to finance this through internally generated funds and/or bank borrowings.

While upfront capital is required, Malacca Securities emphasises that this investment underpins two decades of steady O&M and chilled water revenue. The research house views this unfavourably from a short-term cash flow perspective but positively as a long-term earnings engine.

Valuation: Why Malacca Securities Reinstated BUY

Malacca Securities maintains a BUY call on KJTS with a target price of RM1.23, implying 12.8% upside from recent levels. The target is derived from applying a 30x P/E multiple to the research house’s FY27 earnings per share (EPS) forecast of 4.11 sen.

The reinstatement follows stronger-than-expected 1H26 earnings and the proven track record of KJTN Engineering with Centel—this is the company’s fourth project win with the hotel operator, validating its engineering credibility and deepening customer relationships within the Central Group ecosystem.

Risks to Monitor

Malacca Securities identifies three downside risks to the recommendation. First, KJTS may struggle to replenish its order book once current contracts are secured, leaving revenue growth exposed to execution risk. Second, changes to TNB’s (Tenaga Nasional Berhad) tariff policies could pressure the economics of energy efficiency services across the region.

Third, customer contract terminations remain a tail risk, though the 20-year duration and DBO structure with Centel provide reasonable protection against abrupt cancellations. The company’s ability to secure follow-on work within the Central Group’s broader hotel and retail portfolio will be key.

What This Means for Retail Investors

This contract win demonstrates that KJTS is successfully shifting from cyclical project-based revenue toward a more predictable energy services model. For retail investors, the two-decade revenue visibility offers clarity on earnings trajectory—a rarity in the engineering and services space on Bursa Malaysia.

The RM11.2 million capital spend will temporarily weigh on free cash flow and balance sheet metrics, but the payoff is a recurring revenue stream with minimal revenue volatility. Investors with a medium to long-term horizon may find the earnings growth pathway compelling; those focused on near-term dividend yield or free cash flow should carefully weigh the upfront capex burden.

The repeat wins with Centel also signal that KJTN Engineering has established genuine competitive advantages in cooling and retrofit solutions within Thailand’s hospitality sector. Cross-selling scope within Central Group’s broader asset base remains an underappreciated opportunity.

For the full analysis, including detailed sensitivity analysis and balance sheet impact, refer to the complete Malacca Securities research report available on M+ Online.

Key Takeaways

• KJTS secures four 20-year contracts worth RM47.8m in fixed fees, with RM2.4m annual revenue from FY28 onwards
• Energy Services now accounts for 72% of group revenue (1H26), up from 56.5% year-ago, validating strategic pivot to recurring income
• Malacca Securities raises FY26/FY27 earnings forecasts by 33.2% and 5.1% respectively, projects 20.1% earnings CAGR through FY28
• Target price raised to RM1.23 on 30x P/E multiple; BUY reinstated with 12.8% upside, though capital spend of RM11.2m may pressure near-term cash flow
• Repeat wins with Centel highlight KJTN’s track record; order book replenishment and TNB tariff exposure remain key risks

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research before making investment decisions.

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