KKB's new contract to strengthen piping segment, billing prospects still positive
KUALA LUMPUR: KKB Engineering Bhd’s (KKB) latest supplementary contract from CMS Infra Trading Sdn Bhd (CMSIT) is expected to strengthen the group’s piping segment, which has been a key component to its business, analysts observed.
They also highlighted that the group’s financial results have been on positive trend and its management expects the momentum to continue uninterrupted, which signals a positive trend in progress billings.
In a filing on Bursa Malaysia, KKB said, its subsidiary, Harum Bidang Sdn Bhd (Harum) had receiv ed a supplementary contract from CMSIT for the supply and delivery of concretelined mild steel pipes and mechanical couplings to JKR Central Unallocated Stores, Tanah Puteh, Kuching, on a ‘as and when required’ basis.
The supplementary contract expires on August 31, 2020.
MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) commented: “We estimate that KKB’s outstanding order book is currently at RM0.9 billion, providing four-folds earnings visibility to FY17 earnings. Accordingly, the new addition of supplementary contract will strengthen its piping segment, which has been a key component to its business.”
The research team further highlighted KKB has shown improvement in earnings results supported by its Pan Borneo Highway (PBH) and Wellhead Platform projects.
“In 3QFY18, we recall that PBH captured the largest share of revenue contribution at 88.9 per cent. Accordingly, management expects the momentum to continue uninterrupted, which signals a positive trend in progress billings,” it added.
Moving forward, MIDF Research noted that the group’s prospect is heavily centred on the pending implementation of Sarawak Water Grid plan, which it believed would likely take its course soon.
“We recall that a sum of RM2.8 billion was allocated to fund a total of 247 water and water-related projects for implementation in the next two years,” it added.
All in, MIDF Research retained its ‘buy’ call on the stock as it believed the risk-reward return embedded in KKB’s prospect is attractive.
“In the near term, KKB is expected to enter into open tenders worth approximately RM350 million. The total sum is primarily a combination of Oil & Gas, water projects, and pipe supplies,” it added.