Small Cap Asean Research
15 August 2025
Malaysia Results Review
Construction & Engineering | Construction
KKB Engineering (KKB MK)
Manufacturing Division Flexing Its Muscles; Stay BUY
- Stay BUY, with new MYR1.65 TP from MYR1.74, 21% upside with c.4% FY26F yield. KKB Engineering reported a core net profit of MYR5.7m (-18% YoY) for 1H25 which missed our estimates – making up 25% of our initial FY25F. The negative deviation was mainly due to the weaker-than-expected performance of the engineering division. The group is expected to reset its activities in FY25 whereby projects have reached its tail end while it continues tendering for a new round of jobs.
- Results review. The engineering division of KKB recorded a PAT of MYR3.5m in 2Q25 (2Q24 PAT: MYR12.8m) stemming from the steel fabrication arm which saw two major projects at its tail end which related to Sarawak Shell (c.MYR300m) and the Rosmari and Marjoram (R&M) onshore gas plant in Bintulu (MYR112.6m) awarded by Samsung E&A Engineering. Nonetheless, 2Q25’s engineering PAT cancelled out 1Q25’s net loss of MYR3.4m. Meanwhile, the manufacturing division rebounded to a PAT of MYR4.6m from a net loss of MYR1.4m supported by KKB’s supply of mild steel concrete lined pipes for a water treatment plant in Sibu and a regional water supply project in Serian.
- Orderbook. As at end-2Q25, KKB’s outstanding orderbook stood at c.MYR127m (end-1Q25: c.MYR250m), while the group’s tenderbook for engineering and construction as of end 2Q25 is worth c.MY231m. Moving forward, the group expects to submit another set of bids with a combined value of MYR650m for the engineering and manufacturing divisions) and MYR1.2bn for oil & gas jobs in 2H25 (estimated success rate of 30-40%) – of which outcomes are expected to be known in FY26.
- Since results underperformed expectations we lower our FY25F-27F earnings by 14%, 6% and 7% as we impute more conservative job target wins for FY25 of MYR200m (from MYR300m) and tone down on our billings progress assumptions across FY25 to FY27. As such, we arrive at a new TP of MYR1.65 by pegging our FY26F EPS to an unchanged target P/E of 17x, and applying a 2% ESG premium to the stock’s intrinsic value. KKB’s target P/E is near the Bursa Malaysia Industrial Production Index’s 10-year mean. This is justified by its position – it could benefit from Sarawak’s own MYR10.8bn development expenditure for 2025 (2024: MYR9bn).
- Key rerating catalysts: Faster-than-expected wins from the oil & gas fabrication space since the last time it secured a project from the said space was in Nov 2023. Upcoming water supply schemes in Sabah which Gamuda (GAM MK, BUY, TP: MYR6.52) could likely secure, may also serve as a potential job opportunity for KKB.
- Key downside risks include slower-than-expected job replenishment trends.
Target Price (Return): MYR1.65 (+21%)
Price (Market Cap): MYR1.36 (USD93.4m)
ESG score: 3.1 (out of 4)
Avg Daily Turnover (MYR/USD) 0.03m/0.01m
Analyst
Adam Bin Mohamed Rahim
+603 2302 8101
adam.mohamed.rahim@rhbgroup.com
Share Performance (%)
| YTD | 1m | 3m | 6m | 12m | |
|---|---|---|---|---|---|
| Absolute | (11.7) | 7.1 | (7.5) | (4.2) | (16.1) |
| Relative | (8.0) | 4.3 | (7.3) | (3.5) | (14.1) |
52-wk Price low/high (MYR) 1.24 – 1.67
[Chart showing KKB Engineering’s stock price relative to the FBM KLCI from August 2024 to August 2025 is displayed here in the original document.]
Source: Bloomberg
Forecasts and Valuation
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total turnover (MYRm) | 471 | 634 | 411 | 556 | 640 |
| Recurring net profit (MYRm) | 27 | 26 | 20 | 27 | 32 |
| Recurring net profit growth (%) | 114.3 | (2.1) | (23.4) | 36.6 | 16.9 |
| Recurring P/E (x) | 14.67 | 14.99 | 19.57 | 14.33 | 12.25 |
| P/B (x) | 1.0 | 0.9 | 0.9 | 0.9 | 0.9 |
| P/CF (x) | 12.22 | 28.02 | na | 8.06 | 5.02 |
| Dividend Yield (%) | 5.1 | 5.5 | 2.6 | 3.5 | 4.1 |
| EV/EBITDA (x) | 3.70 | 3.26 | 3.91 | 3.45 | 3.11 |
| Return on average equity (%) | 6.6 | 6.4 | 4.8 | 6.4 | 7.2 |
| Net debt to equity (%) | net cash | net cash | net cash | net cash | net cash |
Overall ESG Score: 3.1 (out of 4)
E Score: 2.7 (GOOD)
S Score: 4.0 (EXCELLENT)
G Score: 2.8 (GOOD)
Please refer to the ESG analysis on the next page
Note: Small cap stocks are defined as companies with a market capitalisation of less than USD0.5bn.
Source: Company data, RHB
Emissions And ESG
Trend analysis
KKB monitors Scope 1 emissions by conducting the stack sampling for the chimney of the burner and spray booth. The quarterly data collected for three consecutive years shows that dust particulate emissions ie CO2 for Burner C6, spray booth C2 and C3 was BELOW 150mg per cu m; the standard limit of the Environmental Quality (Clean Air) Regulations 2014. There is a downward trend in CO2 emissions from FY21 to FY23 for Burner C6, and spray booth C2 and C3.
Emissions (tCO2e)
| Dec-22 | Dec-23 | Dec-24 | Dec-25 | |
|---|---|---|---|---|
| Scope 1 | – | na | na | na |
| Scope 2 | na | na | na | na |
| Scope 3 | na | na | na | na |
| Total emissions | na | na | na | na |
Source: Company data, RHB
Latest ESG-Related Developments
A new decanter has significantly reduced KKB’s smoke emissions. The very small amount of smoke emitted from the decanter is properly channelled through the ducting, and dispersed through the chimney.
The company’s spent hydraulic oil is being reused as lubrication for heavy-duty machineries such as shovel trucks and forklifts. Machine parts that are constantly soiled by cement waste water are coated.
ESG Unbundled
Overall ESG Score: 3.1 (out of 4)
Last Updated: 24 Feb 2025
E Score: 2.7 (GOOD)
KKB monitors and ensures that its fuel burning system discharge complies with environmental regulations, whereby all fuel burning equipment are registered with the Department of Environment, with periodic monitoring of discharge conducted by a third party.
S Score: 4.0 (EXCELLENT)
The group’s commitment to operate responsibly in a safe and healthy workplace for employees is reflected through the record of 10.1m safe-working man hours with zero lost time injury for the completed and ongoing contracts as of end Jun 2025.
G Score: 2.8 (GOOD)
Board characteristics are within the requirements stipulated by Bursa Malaysia, with half of the board consisting of independent directors.
ESG Rating History
[A chart showing the ESG rating history from August 2023 to August 2025 is displayed here in the original document. The rating has consistently been 3.0.]
Source: RHB
Financial Exhibits
Asia
Malaysia
Construction & Engineering
KKB Engineering
KKB MK
Buy
Valuation basis
17x FY25F P/E
Key drivers
KKB’s earnings are backed by an outstanding order backlog of c.MYR127m as of Jun 2025, which mainly comes from construction and oil & gas contracts.
Key risks
Slower-than-expected job replenishment trend
Company Profile
KKB Engineering is primarily involved in steel fabrication, civil construction and the manufacturing of steel pipes and liquefied petroleum gas (LPG) cylinders.
Financial summary (MYR)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Recurring EPS | 0.09 | 0.09 | 0.07 | 0.09 | 0.11 |
| DPS | 0.07 | 0.08 | 0.03 | 0.05 | 0.06 |
| BVPS | 1.41 | 1.43 | 1.47 | 1.51 | 1.57 |
| Return on average equity (%) | 6.6 | 6.4 | 4.8 | 6.4 | 7.2 |
Valuation metrics
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Recurring P/E (x) | 14.67 | 14.99 | 19.57 | 14.33 | 12.25 |
| P/B (x) | 1.0 | 0.9 | 0.9 | 0.9 | 0.9 |
| FCF Yield (%) | 5.6 | 2.6 | (12.4) | 11.1 | 18.7 |
| Dividend Yield (%) | 5.1 | 5.5 | 2.6 | 3.5 | 4.1 |
| EV/EBITDA (x) | 3.70 | 3.26 | 3.91 | 3.45 | 3.11 |
| EV/EBIT (x) | 4.52 | 3.85 | 4.79 | 3.92 | 3.44 |
| Income statement (MYRm) | Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F |
|---|---|---|---|---|---|
| Total turnover | 471 | 634 | 411 | 556 | 640 |
| Gross profit | 87 | 104 | 72 | 97 | 112 |
| EBITDA | 55 | 66 | 49 | 63 | 72 |
| Depreciation and amortisation | (10) | (10) | (9) | (8) | (7) |
| Operating profit | 45 | 56 | 40 | 56 | 65 |
| Net interest | (1) | (4) | (1) | (3) | (3) |
| Pre-tax profit | 52 | 56 | 41 | 57 | 65 |
| Taxation | (18) | (15) | (10) | (14) | (16) |
| Reported net profit | 27 | 26 | 20 | 27 | 32 |
| Recurring net profit | 27 | 26 | 20 | 27 | 32 |
| Cash flow (MYRm) | Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F |
|---|---|---|---|---|---|
| Change in working capital | (13.9) | (27.0) | (75.2) | 2.3 | 24.5 |
| Cash flow from operations | 32.1 | 14.0 | (43.8) | 48.7 | 78.3 |
| Capex | (10.3) | (3.8) | (5.0) | (5.0) | (5.0) |
| Cash flow from investing activities | 5.9 | 36.0 | 106.1 | (44.9) | (44.9) |
| Dividends paid | (17.3) | (20.2) | (21.7) | (10.0) | (13.7) |
| Cash flow from financing activities | (29.1) | (32.1) | (22.9) | (11.7) | (15.7) |
| Cash at beginning of period | 16.1 | 35.7 | 53.2 | 81.9 | 74.0 |
| Net change in cash | 8.9 | 18.0 | 39.4 | (7.9) | 17.7 |
| Ending balance cash | 25.1 | 53.7 | 92.6 | 74.0 | 91.7 |
| Balance sheet (MYRm) | Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F |
|---|---|---|---|---|---|
| Total cash and equivalents | 232 | 218 | 252 | 243 | 259 |
| Tangible fixed assets | 135 | 129 | 108 | 101 | 112 |
| Total investments | 10 | 12 | 13 | 10 | 8 |
| Total assets | 642 | 823 | 721 | 770 | 833 |
| Short-term debt | 0 | 0 | 0 | 0 | 0 |
| Total long-term debt | 0 | 0 | 0 | 0 | 0 |
| Total liabilities | 184 | 356 | 233 | 253 | 283 |
| Total equity | 459 | 467 | 488 | 517 | 550 |
| Total liabilities & equity | 642 | 823 | 721 | 770 | 833 |
| Key metrics | Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F |
|---|---|---|---|---|---|
| Revenue growth (%) | 21.7 | 34.7 | (35.2) | 35.3 | 15.1 |
| Recurrent EPS growth (%) | 103.1 | (2.1) | (23.4) | 36.6 | 16.9 |
| Gross margin (%) | 18.4 | 16.3 | 17.5 | 17.5 | 17.5 |
| Operating EBITDA margin (%) | 11.6 | 10.4 | 11.9 | 11.4 | 11.2 |
| Net profit margin (%) | 5.7 | 4.1 | 4.9 | 4.9 | 5.0 |
| Dividend payout ratio (%) | 75.9 | 82.6 | 50.0 | 50.0 | 50.0 |
| Capex/sales (%) | 2.2 | 0.6 | 1.2 | 0.9 | 0.8 |
| Interest cover (x) | 20.2 | 10.1 | 18.7 | 19.2 | 19.0 |
Source: Company data, RHB
Figure 1: KKB’s results review
| FYE Dec (MYRm) | 2Q24 | 1Q25 | 2Q25 | QoQ (%) | YoY (%) | FY23 | FY24 | YoY (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 109.2 | 45.1 | 55.6 | 23.1 | -49.1 | 259.5 | 100.7 | -61.2 | Higher revenue from supply of mild steel concrete lined pipes |
| EBIT | 16.1 | -4.6 | 8.1 | >100 | -50.0 | 27.1 | 3.5 | -87.2 | |
| EBIT margin (%) | 14.8% | -10.1% | 14.5% | 10.5% | 3.5% | ||||
| Interest expense | -1.3 | -1.7 | -0.2 | -87.5 | 83.7 | -2.4 | -1.9 | -19.7 | |
| Interest income | 0.5 | 0.4 | 0.3 | -23.3 | -38.0 | 1.1 | 0.7 | -31.0 | |
| JV/associates | 1.2 | 0.0 | 0.3 | >100 | -75.3 | 2.2 | 0.3 | -86.8 | |
| EI/others | 0.1 | -0.1 | 0.1 | >100 | -30.9 | -0.2 | 0.0 | -83.6 | |
| Pre-tax profit | 17.5 | -4.2 | 10.4 | >-00 | -40.6 | 30.8 | 6.2 | -79.9 | |
| Pre-tax margin (%) | 16.1% | -9.4% | 18.8% | 11.9% | 6.1% | ||||
| Tax | -6.1 | 1.1 | -2.3 | >-100 | 61.5 | -9.7 | -1.2 | -87.2 | |
| Effective tax rate (%) | 34.6% | -25.9% | 22.4% | 31.4% | 20.0% | ||||
| Minority interest | -8.1 | 1.8 | -1.0 | >-100 | 57.6 | -14.0 | 0.8 | >100 | |
| Net profit | 3.4 | -1.4 | 7.1 | >100 | >100 | 7.2 | 5.7 | -19.8 | |
| Core profit | 3.5 | -1.5 | 7.2 | >100 | >100 | 7.0 | 5.7 | -18.1 | Below expectations |
| Core net margin (%) | 3.2% | -3.2% | 12.9% | 2.7% | 5.7% |
Source: Company data, RHB
Recommendation Chart
[Chart showing historical price, recommendations and target prices from August 2020 to February 2025 is displayed here in the original document.]
Source: RHB, Bloomberg
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-05-22 | Buy | 1.74 | 1.38 |
| 2025-05-21 | Buy | 1.83 | 1.46 |
| 2025-02-25 | Buy | 1.91 | 1.46 |
| 2024-11-12 | Buy | 1.86 | 1.56 |
| 2024-08-23 | Buy | 1.95 | 1.60 |
| 2024-05-21 | Buy | 2.11 | 1.83 |
| 2024-04-08 | Buy | 2.02 | 1.67 |
| 2024-02-23 | Buy | 2.02 | 1.71 |
| 2024-01-23 | Buy | 2.02 | 1.70 |
| 2023-11-22 | Buy | 1.90 | 1.43 |
| 2023-08-21 | Buy | 1.90 | 1.45 |
| 2023-05-25 | Buy | 1.80 | 1.44 |
| 2023-04-10 | Buy | 1.72 | 1.40 |
| 2023-03-21 | Buy | 1.72 | 1.44 |
| 2023-02-24 | Buy | 1.72 | 1.41 |
Source: RHB, Bloomberg
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
Investment Research Disclaimers
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RESTRICTIONS ON DISTRIBUTION
Malaysia
This report is issued and distributed in Malaysia by RHB Investment Bank Berhad (“RHBIB”). The views and opinions in this report are our own as of the date hereof and is subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. RHBIB has no obligation to update its opinion or the information in this report.
Indonesia
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Singapore
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United States
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DISCLOSURE OF CONFLICTS OF INTEREST
RHB Investment Bank Berhad, its subsidiaries (including its regional offices) and associated companies, (“RHBIB Group”) form a diversified financial group, undertaking various investment banking activities which include, amongst others, underwriting, securities trading, market making and corporate finance advisory.
Malaysia
Save as disclosed in the following link RHB Research Conflict Disclosures Aug 2025 and to the best of our knowledge, RHBIB hereby declares that:
- RHBIB does not have a financial interest in the securities or other capital market products of the subject company(ies) covered in this report.
- RHBIB is not a market maker in the securities or capital market products of the subject company(ies) covered in this report.
- None of RHBIB’s staff or associated person serve as a director or board member* of the subject company(ies) covered in this report. *For the avoidance of doubt, the confirmation is only limited to the staff of research department.
- RHBIB did not receive compensation for investment banking or corporate finance services from the subject company in the past 12 months.
- RHBIB did not receive compensation or benefit (including gift and special cost arrangement e.g. company/issuer-sponsored and paid trip) in relation to the production of this report.
