Spearheaded by the founder of SERBADK, Mohd Abdul Karim Abdullah (who bought a 53% stake in June 2019), the Company is repositioning itself across diverse areas in energy, utilities and construction industries to generate sustainable concession based revenue streams, leveraging on the management’s vast experience and industry network. KPOWER’s risk-reward profile is attractive after skidding 40% from a 52-week high of RM3.11 to RM1.88 last Friday or 6.3x FY21E (30% discount vs peers), supported by RM1bn order book (mainly encompassing infrastructure, energy and facilities projects) and RM2.5bn tender book (Middle East: RM1.2bn; Malaysia: RM908m; Indonesia RM276m and Loas RM180m), as well as RM4.3m netcash (or 5sen/share). Technically, the stock is poised for a bullish triangle breakout to spur prices further towards RM2.16-2.50 territory.

Achieved RM1bn target so far. YTD, KPOWER has secured new orders of RM1bn including (i) RM354m EPCC of 5 mini hydropower plants with total capacity of 32.47MW, (ii) RM254m sewerage facilities and green building construction project, (iii) RM208m EPCC of 23MW mini hydro power plant at Nepal, (iv) RM68m EPCC of 8MW small hydropower plant at Laos, among others. Current bid value stands at RM2.5bn, whereby 65% of it is attributable to the energy segment, followed by the infrastructure and utilities sectors. Middle East (RM1.2bn) accounted about 48% of the tender book, followed by Malaysia (36% or RM908m), Indonesia (RM276m or 11%) and Loas (RM180m or 5%). We would believe that the bulk of the job opportunities leverage on the connections of Dato’ Karim – founder of Serba Dinamik – who also has a strong presence in the Middle East.

Pending a bullish triangle breakout. After sliding 72.7% from a 52-week high of RM3.11 (21 Feb) to a low of RM0.85 (23 Mar), KPOWER is gaining traction above key 20/D/100D/200D SMAs and staged a neckline resistance breakout above RM1.84 recently. If supported by higher volume, KPOWER is poised to break the immediate RM2.00 and the critical downtrend resistance near RM2.16 barriers. Breaking these hurdles will spur prices towards our LT target at RM2.50 levels. Supports are pegged at RM1.72-1.80 zones. Cut loss at RM1.68.

Source: Hong Leong Investment Bank Research - 25 May 2020