KKB’s near-term results anticipated to be within expectations

This article first appeared in The Edge Financial Daily, on September 6, 2019.
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KKB Engineering Bhd
(Sept 5, RM1.43)
Maintain neutral with an unchanged target price (TP) of RM1.47:
An agreement has been entered between KKB Engineering Bhd and Sinohydro Corp for the supply of pipes and fittings. Additionally, KKB has also received a purchase order for the annual supply and delivery of steel products from Syarikat Sesco Bhd.

The contract sum of both jobs is estimated at RM29 million. Accordingly, the works will run for approximately four to nine months. In our estimates, the sum has already been accounted for in our total new jobs for this year amounting to RM250 million. So far this year, we noted, KKB has announced RM217.4 million in new order book to make up 87% of its job target for financial year 2019.

We make no change to our estimates as the latest value of new jobs secured is within our expectations.

KKB has been actively bidding for the state water projects in the first half of 2019, indicating that any upcoming awards from the projects could potentially manifest towards year end. For the near term, we expect its results to be within our expectations, supported by progress billings for the Pan Borneo Highway Sarawak package. Given the strength shown in its share price (it has risen by 66.7% on a year-to-date basis), we maintain “neutral” with an unchanged TP of RM1.47. Upside risks to our call include: i) faster-than-expected progress in the construction division; and ii) sooner-than-expected state project awards. Moving forward, any retracement in its share price should be seen as a chance to accumulate the stock. — MIDF Research, Sept 5