INVESTMENT HIGHLIGHTS

• Awarded two contracts to supply and deliver pipe and steel products

• Both contracts sum to a total of RM17.8m

• So far in 2019, KKB has managed to replenish its orderbook with sizeable contracts

• Maintain BUY with unchanged TP of RM1.35

Awarded two contracts to supply and deliver pipe and steel products. KKB Industries (Sabah), a subsidiary of KKB Engineering (“KKB”), has received a purchase order from Leadshine Sdn Bhd (“Leadshine”) for the supply and delivery of concrete-lined mild steel pipes. In the same announcement, KKB was awarded the tender for annual supply and delivery of steel products from Syarikat SESCO Berhad (“SESCO”). Together, both contracts will contribute positively to KKB’s pipe manufacturing business.

Both contracts sum to a total of RM17.8m. This will add to the outstanding orderbook of KKB which (as of Dec 2018) stood at RM0.9b. Hence, the current unbilled job will keep KKB busy for the next two years until CY21.

So far in 2019, KKB has managed to replenish its orderbook with sizeable contracts, which includes the award from Jabatan Bekalan Air Luar Bandar Sarawak (“JBALB”). These are water-related contracts of various scope with value amounted to RM110.8m.

The state water project is worth RM2.8bn. Accordingly, KKB’s tenderbook will likely expand as the bids for tender could likely intensify during the year. This is in respect of the need-base nature of proper water system in the identified stress areas. For FY19, the new jobs assumptions we ascribed is approximately RM250m.

Maintain BUY. We maintain our BUY recommendation on KKB with an unchanged TP of RM1.35, as we think the risk-reward embedded in KKB’s prospect is attractive. In the near term, KKB is expected to bid in more open tenders of projects to be rolled out particularly by the Sarawak state government.

Source: MIDF Research - 16 Apr 2019