KKB Engineering told Bursa Malaysia that the company has signed a Memorandum of Understanding (MOU) with Brooke Dockyard & Engineering Works Corporation (Brooke Dockyard) to set out its intention and mutual understanding in connection with a proposed strategic alliance and joint-venture (JV). The MOU is valid for 6 months and both parties shall negotiate and formulate the framework for the alliance followed by the formation of JV or similar form of collaboration. The collaboration includes a lease of the deepwater river front yard by KKB to Brooke Dockyard for its Oil & Gas (O&G) substructure and other works, with the exclusive rights given to KKB to undertake such works to the extent its service can meet Brooke Dockyard’s client requirements.
While we give a thumbs-up to the proposed alliance, it is still at the MOU stage and may take
some months before the JV company is formed. Thus there is no immediate impact on the company’s
earnings. At this point, information on the tie-up remains sketchy due to the brevity of the announcement.
Nonetheless, this piece of news will obviously be positive for the company’s share price. Thus we maintain
our BUY call on KKB, at a fair value of RM2.20, derived from its 8x FY12EPS.
While we give a thumbs-up to the proposed alliance, it is still at the MOU stage and may take
some months before the JV company is formed. Thus there is no immediate impact on the company’s
earnings. At this point, information on the tie-up remains sketchy due to the brevity of the announcement.
Nonetheless, this piece of news will obviously be positive for the company’s share price. Thus we maintain
our BUY call on KKB, at a fair value of RM2.20, derived from its 8x FY12EPS.
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