KUCHING: Shares in KKB Engineering Bhd (KKB) rose yesterday following news of the local player securing two contracts valued at RM11.4 million for the supply of steel products.
The contracts involve the provision of pipes and specials for Cityon Development Sdn Bhd (SDSB) under a state rural water supply project, and for additional supply of steel products to Syarikat SESCO Bhd.
Yesterday, the stock rose three sen or 2.19 per cent to RM1.40 as at closing.
AmInvestment Bank Bhd (AmInvestment Bank) observed that the CDSB contract is scheduled for completion by 1Q17 and for SESCO, within 3Q17. The awards are expected to contribute positively to the group’s FY16 and FY17 earnings.
“Apart from such contracts in the supply of steel products under the state’s rural water supply and electrification projects, we are keeping an eye on KKB’s bid for works under the Pan Borneo Highway,” it said in a note yesterday.
“We expect the awards of the remaining eight packages of the highway to be just round the corner. Lebuhraya Borneo Utara has said decisions on the eight packages are expected to be made by mid-July.
“Along with its joint venture partner WCT Engineering, KKB is bidding for a main works package, apart from the utilities relocation works as well as for the supply of guardrails along the highway.”
Apart from an annual order book renewal assumption of RM200 million for each of FY16F to FY18F, AmInvestment Bank said it has yet to incorporate into its model KKB’s securing of a main works package and the ancillary jobs of the highway.
“Separately, we expect KKB’s associate Oceanmight Sdn Bhd to secure an annual O&G fabrication order replenishment of RM130 million for each of FY17F and FY18F. The group is currently busy with two Talisman platform EPC fabrication jobs, which are expected to be completed by 3Q17.
“KKB had earlier in May announced the securing of the second Talisman contract, along with two other conventional jobs for other parties, for a combined value of RM87.7 million. We estimate the group’s current total outstanding jobs, including the fabrication works, to be valued at over RM200 million.
“Mitigating any downside risks is a net cash position of RM139 million as at end-March 2016.”
This led the firm to maintain its buy call on KKB with an unchanged fair value of RM2 per share.