KKB rebounds in 4QFY12 backed by strong order book

0

KUCHING: KKB Engineering Bhd’s (KKB) financial year 2012 (FY12) results came in below expectations with a cumulative net profit of RM20.5 million though its order book was strong following aggressive replenishment in
the second half of FY12 (2HFY12).

According to OSK Research Sdn Bhd (OSK Research) in its research report, “KKB’s results for FY12 were slightly below estimates. However, the company saw a strong improvement in the final quarter of FY12 (4QFY12), chalking up a net profit of RM7.3 million.”

The 4QFY12 results were a 100 per cent increase quarter on quarter and 9.2 per cent increase year on year.

The research house believed that the rebound was mainly driven by KKB’s civil construction and steel pipe businesses.

“Although the FY12 cumulative net profit of RM20.5 million was below our earlier estimate for RM23.9 million, we still deem the numbers largely within our forecast as the contribution of its recent book enhancements may not make significant impact on KKB’s FY12 bottomline.”

KKB, having aggressively replenished its order book since the second half had bagged a total of RM375.5 million jobs to date.

“With the strong order book carried forward to FY13, we are positive that the company would be able to perform better,” OSK Research added.

The completion of KKB’s deepwater river-front fabrication yard and jetty facilities was expected to allow the group to expand further into the oil and gas fabrication works in the near future.

“This is not forgetting KKB’s signing of an memorandum of understanding with Brooke Dockyard last year. Although this joint venture has yet to be finalised. Nevertheless, any expansion in oil and gas (O&G) would represent a positive rerating for the stock.”

Going forward, OSK Research remained positive on strong growth in Sarawak as well as heightening developments in the future backed by the Sarawak Corridor of Renewable Energy (SCORE).

It opined that KKB’s strong presence in the state would allow it to ride on the boom and reap the benefits from the growth of the land of hornbills.

The research house maintained its positive outlook on the company, retaining its RM1.75 per share fair value based on a 10 times FY13 forecast price earnings ratio seeing that the company’s strong order book, O&G expansion as well as the SCORE’s bullish outlook.

The research house believed that these factors would serve to boost KKB’s outlook this financial year.