KKB sinks 7% on weaker 3Q earnings, gets rating downgrade

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KUALA LUMPUR (Nov 17): Steel products manufacturer KKB Engineering Bhd sank 14 sen or 7.1% to its intraday low of RM1.82, weighed down by weaker third-quarter earnings

At 10:53am, KKB saw some 205,700 shares changed hands. It was one of the top decliners on the local bourse.

The FBM KLCI fell 1.26 points or 0.1%.

KKB reported last Friday net profit fell to RM1.23 million in its third quarter ended September 30 2014 (3QFY14) from RM7.14 million a year earlier. Revenue came in lower at RM44.83 million compared with RM56.89 million.

The weaker numbers have invited analyst downgrades on KKB. In a note today, MIDF Research analyst Hafiz Hassan said KKB’s 3QFY14 earnings were slightly below consensus forecast and MIDF's estimates.

MIDF has downgraded KKB shares to “neutral” with a lower target price of RM2.15 from RM2.84 previously.

“We had earlier assumed higher earnings prospects for the group in FY14 and FY15. However, we believe that the potential earnings will be sluggish going forward due to dearth of new jobs and lower net profit margin,” said Hafiz.

Accordingly, MIDF has tweaked its FY14 and FY15 earnings projections for KKB lower by 24% and 44% with net profit margins at 9.5% and 10.2% respectively.

“Despite continuous earnings setback, we believe that KKB still has a strong proxy to steel related works in robust Sarawak region development and will be a beneficiary of future subcontract oil& gas fabrication job awards.

"This will be supportive of its future earnings albeit at lower margins,” Hafiz said.