Wednesday, 12th April 2023
By Corporate News
RHB Research estimates the group’s latest outstanding order book to be around RM700mil.
PETALING JAYA: KKB Engineering Bhd is in a good position to secure more contracts and boost its order book in the near term.
This could come in the form of industrial and not solely restricted to oil and gas projects.
Based on the latest job wins worth some RM463.3mil this year, RHB Research estimated the group’s latest outstanding order book to be around RM700mil (order book-to-revenue cover ratio of 1.8 times).
As such, it is maintaining a “buy” call on the stock with a target price of RM1.72 and 23% upside with around 4% financial year 2023 (FY23) yield.
So far, the company has secured two contract wins this year.
The latest being its subsidiary, OceanMight Sdn Bhd, which secured a RM111.6mil job from Samsung Engineering (M) Sdn Bhd for the module fabrication and supply of steel structures for Malaysia Shell R&M onshore gas plant project in Bintulu, Sarawak.
The first one was in January – a RM351.7mil contract for the engineering, procurement and construction (EPC) provision of three standard-wellhead platforms for Sarawak Shell and a purchase order from Seri Ghanimi Contractor to supply steel pipes.
“We are not surprised with KKB’s latest contract win from Samsung Engineering, in light of its memorandum of understanding with Samsung Engineering inked in October 2021 to collaborate on certain projects.
“In fact, KKB had already been involved in other jobs with Samsung Engineering prior to this to supply pre-engineering building steel structures for a methanol plant in Sarawak that was awarded in FY21.
“As such, we think that KKB may continue to be a frontrunner for more industrial and not just oil and gas fabrication jobs under Samsung Engineering,” it added.
The US$2.6bil (RM11.5bil) Mentarang Induk hydroelectric project in North Kalimantan may serve as a catalyst, as the group was involved in the Bakun Hydroelectric Dam project in 2008, the research house noted.
RHB research said potential fabrication job wins may also come from the Kasawari Carbon Capture and Storage project whereby Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) is the engineering, procurement, construction, installation and commissioning contractor.
KKB was previously involved in two MMHE projects, namely, Jerun and Kasawari.
Key risks to the group include failure to secure new contracts and slowdown in project rollouts, it said.