AmInvestment Bank said KKB’s 70 per cent stake in the joint venture of the project could translate to an estimated amount of RM900 million for the group.
KUCHING: KKB Engineering Bhd (KKB) holds the potential for more contract wins following the latest contract win for a package of the Pan Borneo Highway Sarawak job with joint venture partner WCT Holdings Bhd (WCT).
Analysts are optimistic the company will bag more contracts to replenish its order book and subsequently boost earnings.
AmInvestment Bank Bhd (AmInvestment Bank) in a report yesterday noted that as of July 26, KKB has secured contracts worth RM1 billion, including two on-going platform fabrication jobs for Talisman Malaysia Ltd that are scheduled to be completed by the third quarter of 2017 (3Q17).
With the Pan Borneo Highway contract, KKB has surpassed its earlier assumption of RM200 million new order for financial year 2016 (FY16) ending Dec 2016.
Therefore, AmInvestment Bank has assumed new orders of RM100 million for FY16 (including RM30 million for various pipe supply jobs already secured), RM600million for FY17 and RM200 million for FY18.
Besides that, the research firm also expects KKB’s 43 per cent associate OceanMight Sdn Bhd to secure an annual oil and gas (O&G) order replenishment of RM130 million for each of FY17 and FY18.
Looking ahead, AmInvestment Bank believed KKB remains poised to supply guardrails, lamp posts, and water steel pipes for Pan Borneo Highway.
On Tuesday, KKB in a statement to Bursa Malaysia informed that it had has received a letter of award from Lebuhraya Borneo Utara Sdn Bhd for a work package of the Pan Borneo Highway together with joint venture partner, WCT.
The work package, valued at RM1.29 billion, is for the stretch from Sungai Arip Bridge to Bintulu Airport junction with an estimated distance of 66km.
AmInvestment Bank said KKB’s 70 per cent stake in the joint venture of the project could translate to an estimated amount of RM900 million for the group.
With the latest contract win, AmInvestment Bank has reviewed its numbers and cut its FY16 net profit forecast for KKB by 25 per cent to account for the lack of conventional jobs in the past six months.
Nonetheless, it raised KKB’s FY17’s and FY18’s earnings forecast by three per cent and 55 per cent respectively.
The research firm also maintained its ‘buy’ recommendation on KKB’s shares, valuing the company’s share price with a higher fair value of RM2.10 per share at an implied forward FY17 price-earnings (PE) forecast of 13 times.