• Following the gradual re-opening of economic activities, the resumption of infrastructure projects in Sarawak was given the green light. Some of these projects include the road and transport, water and electricity supply and Sarawak Corridor of Renewable Energy (SCORE).

• We see the local players in East Malaysia to be the key beneficiaries given their strong historical track record and established relationship with state GLCs. Also, several allocations and financing options were available for these projects financing.

Trading Catalyst

• KKB Engineering (KKB) has delivered a strong set of quarterly earnings in 1QFY20. The resumption of works for the Pan Borneo Highway project may see its topline recovering in 2HFY20. Current unbilled orderbook at approximately RM888.0m, translating to an orderbook-to-cover ratio of 1.6x to FY19 revenue of RM559.0m and may sustain earnings over the next two years. Moving forward, we believe KKB will continue to capitalise on future rollout of infrastructure projects in Sarawak.

Technical Outlook

• The uptrend formation was established in mid-May 2020 as price recovered from the bottom at the RM1.26 level. After finding some support at around the EMA60 level, price regained its momentum, forming the gap up formation, breaking above the RM1.79 short-term resistance level. Price may stage further recovery to towards the next resistance of RM1.91-RM2.01, levels with long term target at RM2.20. Support is set at around RM1.70 level, while cut loss point at RM1.69.

Source: Mplus Research - 10 Jun 2020