RHB Research tweaked KKB’s 2025 and 2026 earnings forecasts upwards by 3% each.
PETALING JAYA: KKB Engineering Bhd
’s earnings forecasts have been revised upward for 2025 and 2026 after the steel fabrication company turned in stronger-than-expected results for last year.
RHB Research said KKB’s core earnings of RM26.2mil last year exceeded its estimates, making up 120% of its full-year projections.
“The positive deviation is backed by higher-than-expected progress billings for its projects,” the research house said.
RHB Research tweaked KKB’s 2025 and 2026 earnings forecasts upwards by 3% each to account for faster progress-billing assumptions.
The research house also introduced earnings forecast for 2027, which incorporates a RM500mil job-replenishment assumption.
“As such, we arrive at a new target price of RM1.91 by pegging our earnings per share for this year to an unchanged target price-earnings (PE) ratio of 17 times, and applying a 2% environmental, social and governance premium to the stock’s intrinsic value.”
KKB’s target PE is near the Bursa Malaysia Construction Index’s five-year mean during the 2017 construction upcycle.
“KKB could benefit from Sarawak’s development expenditure of RM10.8bil for this year in light of its track record with state-driven projects, on top of Petroleum Sarawak’s allocation of RM40bil in capital expenditure for the next five years.”
Despite exceeding expectations for last year, core earnings of KKB fell by 1% year-on-year (y-o-y).
The engineering wing’s net profit for last year surged by 26% y-o-y, with net margins remaining near 7% due to the progress of steel fabrication works for Sarawak Shell, the Rosmari and Marjoram onshore gas plant in Bintulu and fabrication work for the Kasawari Carbon Capture and Storage project, among others.
The manufacturing arm recorded an after-tax loss of RM500,000 last year despite the completion of an order for mild steel pipe for Brunei.
An order secured in December 2024 for the Ulu Padas Hydroelectric Project in Sabah is still in its early stages.
As of the end of last year, KKB’s outstanding order book stood at about RM226mil, with about RM220mil worth of jobs clinched over the year.
Its tender book stood at about RM254mil, with outcomes likely to be known within the first half of this year.
“The group is also in the midst of bidding for contracts worth RM500mil, with an estimated success rate of 30% to 40%, for oil and gas-related jobs. The outcomes expected to be known in the third or fourth quarter of this year,” said RHB Research.
The research house retained its “buy” call on KKB and raised its target price from RM1.86 per share to RM1.91.
The stock closed at RM1.46 in trading yesterday.
