- 28 December 2012 09:17AM
KKB Engineering - Lands RM10m Home-Based Steel Works Job (OSK)
buy
Fair Value: MYR1.75
THE BUZZ
KKB Engineering (KKB) announced on Bursa Malaysia yesterday that it has accepted a Letter of Award for the Supply, Fabrication, Delivery and Erection of Structural Steel Works for certain parts of the Corridor Roof Structure for the proposed University College of Technology Sarawak & Technology Park. The subcontract, estimated to be worth RM10.3m, will be completed in five months.
OUR TAKE
Second structural steel works job. This is the second structural steel works KKB has secured after having landed the RM171.0m contract for structural steel and cladding works to construct client Pertama Ferroalloys SB’s ferroalloys complex. Currently, KKB has contracts totaling RM342.7m (RM332.4m + RM10.3m) in its orderbook.
Amount may not be large, but still positive for the company. The RM10.3m contract may not be that significant but still represents a positive trend since structural steel works usually command better margins. Although the date for the commencement of works has yet to be decided, but we think that this contract will contribute positively to KKB’s 1HFY13 earnings growth given that it is estimated to be completed in five months. Nevertheless, we consider this within our expectation and hence make no adjustment in our original forecast.
Stretching over to FY13. As we stated earlier, we may be able to see stronger earnings growth for KKB in 4QFY12, but we still think that most of the company’s earnings from the existing contracts may spill over to FY13, as a result of which the earnings to be attributed to its FY12 bottomline would be somewhat limited. This leads us to believe that FY13 may be a better year for KKB.
Maintain BUY. Against the backdrop of our optimistic view on robust developments in Sarawak, we hold on to our view that the state’s local players like KKB which have a significant presence on home ground will benefit by riding on the wave of those developments. Hence, we are maintaining our BUY recommendation on KKB, with our RM1.75 FV unchanged based on 10x FY13 PER.
KKB Engineering (KKB) announced on Bursa Malaysia yesterday that it has accepted a Letter of Award for the Supply, Fabrication, Delivery and Erection of Structural Steel Works for certain parts of the Corridor Roof Structure for the proposed University College of Technology Sarawak & Technology Park. The subcontract, estimated to be worth RM10.3m, will be completed in five months.
OUR TAKE
Second structural steel works job. This is the second structural steel works KKB has secured after having landed the RM171.0m contract for structural steel and cladding works to construct client Pertama Ferroalloys SB’s ferroalloys complex. Currently, KKB has contracts totaling RM342.7m (RM332.4m + RM10.3m) in its orderbook.
Amount may not be large, but still positive for the company. The RM10.3m contract may not be that significant but still represents a positive trend since structural steel works usually command better margins. Although the date for the commencement of works has yet to be decided, but we think that this contract will contribute positively to KKB’s 1HFY13 earnings growth given that it is estimated to be completed in five months. Nevertheless, we consider this within our expectation and hence make no adjustment in our original forecast.
Stretching over to FY13. As we stated earlier, we may be able to see stronger earnings growth for KKB in 4QFY12, but we still think that most of the company’s earnings from the existing contracts may spill over to FY13, as a result of which the earnings to be attributed to its FY12 bottomline would be somewhat limited. This leads us to believe that FY13 may be a better year for KKB.
Maintain BUY. Against the backdrop of our optimistic view on robust developments in Sarawak, we hold on to our view that the state’s local players like KKB which have a significant presence on home ground will benefit by riding on the wave of those developments. Hence, we are maintaining our BUY recommendation on KKB, with our RM1.75 FV unchanged based on 10x FY13 PER.
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