Analysts slash KKB’s FY22 core earnings expectations by 30 per cent
KUCHING: Analysts have slashed their financial year 2022 (FY22) core earnings expectations for KKB Engineering Bhd (KKB) by 30 per cent to RM17.3 million to reflect the weaker margins.
To note, KKB’s cumulative first nine months of FY22 (9MFY22), core earnings were 68 per cent year on year (y-o-y) lower at RM6.8 million which was below the research arm of MIDF Amanah Investment Bank Bhd’s (MIDF Research) expectations, making up only 27.6 per cent of its full-year estimates.
“We expect our revenue projections to remain intact but we are slashing our FY22E core earnings expectations by 30 per cent to RM17.3 million to reflect the weaker margins,” MIDF Research said.
“We are maintaining our FY23 expectations for now as we expect a favourable year for the construction sector next year.”
MIDF Research also maintained its target price of RM1.50 per share by pegging its FY23F core earnings per share (EPS) of 9.7 sen to the research arm’s target price earnings ratio (PER) of 15.5fold, which is +0.25 SD above the group’s four-year mean PER.
“We believe is justified in view of the group’s normalising earnings after rebounding from its net loss in FY16 and the improved prospects of it securing more jobs in Sarawak.”
Overall, MIDF Research upgraded its recommendation for KKB to ‘buy’.
The research arm had previously downgraded KKB to ‘neutral’ mainly due to the run up in its share price.
“We remain optimistic on KKB’s prospects as evident from its improving civil construction division. Margins are also expected to improve in the coming quarters with the easing of building material prices such as steel bars, which has declined for four consecutive months up to October.
“We expect job flows in the nearer term to come from retendering of delayed or abandoned projects as the administration focuses on fixing sick projects, on top of rolling out new infrastructure works.
“Management is also optimistic on being awarded that numerous tenders it is currently pursuing will be awarded next year.”