Two thumbs up for KKB’s FY18
KUALA LUMPUR: KKB Engineering Bhd’s (KKB) earnings came in beyond expectations, leading analysts to peg a good future for the group heading into 2019.
KKB’s profit after tax, amortisation and minority interest (PATAMI) for the fourth quarter of finnacial year 2018 (4QFY18) came in strong at RM17.6 million, which is a 100 per cent year on year (y-o-y) improvement.
As a result, its full year FY18 earnings came in ahead of consensus’ expectations at 118.8 per cent respectively.
MIDF Amanah Investment Bank Bhd (MIDF Research) said the main contributor was the significant improvement in both steel fabrication and civil construction contributions.
“In 4QFY18, the group’s operating revenue was significantly higher compared to last year, rising by 103.1 per cent y-o-y to RM142.5 million. Revenue contributions were largely driven by engineering and construction sector, which made up 91 per cent of the quarterly aggregate,” it said in a note yesterday.
“The segment was supported by the Pan-Borneo Highway package, which we expect to continue this year.”
The significant rise in revenue was also backed by steel fabrication division, MIDF Research said, asiIn 4QFY18, its revenue grew by more than 100 per cent to RM61.8 million.
Notable projects which command significant share were the EPCIC of Wellhead Platforms for D28 Phase 1 project as well as the two newly commenced jobs of similar scope for Petronas Carigali and Mubadala Petroleum.
Public Investment Bank Bhd (PublicInvest Research) believed KKB’s earnings momentum should continue in FY19 and as such, revised upwards its FY19/20 earnings by 25 and 22 per cent after imputing higher profit margins.
We understand that the Group should be able to maintain the revenue momentum in FY19. For its steel pipes business, the new supplementary contract worth RM46.7 million from CMS Infra Trading Sdn Bhd should underpin the division’s earnings near term while its oil and gas business could also see some new contracts as its subsidiary; Oceanmight Sdn Bhd was awarded the PETRONAS Frame Agreement which qualifies it to bid for Petronas jobs.
In a similar vein, MIDF Research expect the group’s engineering and construction division to continue driving its earnings, on the back of the Pan Borneo Highway’s progress rate.
“Going ahead, we believe that optimism is on the rise for Sarawak state-development plan,” it added. “KKB is likely to be the beneficiary of state water projects, considering its long track record in the piping and steel business.
“We have revised our earnings higher as we make allowance for faster progress rate of ongoing jobs and notable improvement in margin.”