· KKB has secured contracts totalling RM14.60mil to supply steel structures and liquefied petroleum gas cylinders.

· It announced yesterday it had accepted a purchase order from JGC (Malaysia) Sdn Bhd for the supply of fabricated steel structures for Tank 7 new jetty-PAF project for Petronas’ LNG Train 9 Project.

· It also received a purchase order from Petron Malaysia Refining & Marketing Bhd for the supply of 14kg gas cylinders.

· KKB said the completion date for the supply of fabricated steel structures to JGC would be until the third quarter of 2016. The completion date for the supply of the gas cylinders is October 2015.

· Based on our estimates, these two contracts bring the total jobs secured so far this to over RM30mil. We maintain our new job assumption for the year at RM250mil for now.

· As at end-March, it had an outstanding order book of RM80mil-RM90mil that would last until the end of the year. We understand that the group’s current tender book amounts to over RM500mil, a third of which are for jobs in its traditional activities in the manufacture and supply of steel pipes.

· KKB is one of our top picks among three Sarawak stocks, in view the impending state elections – the others being Hock Seng Lee (FV: RM2.30/share) and Sarawak Cable (FV: RM1.70/share). We expect the state to announce more rural development projects ahead of the state elections.

· KKB will benefit from government expenditure in rural development, particularly in the supply of steel pipes for water projects. Additionally, the group can count on the support of its 20% major shareholder CMS, a proxy for development in the state.

· KKB’s earnings profile is anticipated to change significantly, given its foray into O&G support services via 42%-owned associate and Petronas-licensed structures fabricator Oceanmight Sdn Bhd.

· We maintain BUY on KKB, with an unchanged fair value of RM2.05/share – a 5% discount to our SOP of RM2.15/share.

Source: AmeSecurities Research - 21 Jul 2015