RHB Research still sees KKB Engineering as a jewel for its prowess in Sarawak-centric jobs.
KUALA LUMPUR: KKB Engineering Bhd
may have seen earnings which came up short of analyst expectations, but better days may still be ahead for the company.
Most analysts have continued to keep their “buy” calls on the counter, as they expect the company to be among the beneficiaries of the various development plans that are in store for Sarawak.
According to RHB Research, KKB Engineering is expected to see better contributions in the coming quarters that will bring its overall financial year 2024 (FY24) earnings growth to 10%.
It noted that projects such as the Rosmari and Marjoram onshore gas plant in Bintulu are progressing well.
“We still see KKB Engineering as a jewel for its prowess in Sarawak-centric jobs,” said the research firm.
As at the end of the first quarter, the group’s outstanding order book stood at about RM400mil.
About RM38mil jobs were secured in the quarter.
“The group’s tender book stands at RM168mil, of which we estimate 50% to 60% is for oil and gas-related jobs while the remainder is for engineering, construction, and manufacturing contracts.
“Nevertheless, KKB Engineering is in the midst of participating in bids (particularly oil and gas ones) with an estimated amount that could exceed RM1.5bil and an anticipated 25% to 35% success rate,” RHB Research said.
Bid outcomes may be known in the next 18 months, it added.
KKB Engineering registered a core net profit of RM3.9mil in the first quarter of FY24.
Catalysts for this Sarawak-linked stock include earlier-than-expected involvement in hydrogen projects via subsidiary KKB Energy, which plans to undertake projects related to renewable energy such as the assembly of hydrogen electrolysers.
The latest plan by Sarawak to have the first graphite manufacturing plant in Asean may also spell additional opportunities for the group.
This is given its track record in steel fabrication works for industrial buildings in the state, said RHB Research.
Meanwhile, MIDF Research is maintaining its earnings estimates as it expects subsequent quarters to pick up the pace.
“The group recently secured RM37.9mil worth of jobs for the supply of mild steel concrete line pipes and fittings to Perbena Emas Sdn Bhd and an award for liquid petroleum gas (LPG) cylinder fabrication and maintenance from Petronas Dagangan Bhd,” the research firm said.
It noted that its outstanding order book stands at about RM400mil, which will provide earnings visibility up to FY25.
“We are upgrading our target price to RM2.13 as we roll forward our valuation year to FY25 and peg its earnings per share of 12.5 sen to a price-earnings of 17 times, based on the group’s five-year historical mean,” said MIDF Research.
