KGRB: Strong Order Book and Margins Underpin Positive Outlook, Buy Rating Maintained

A leading engineering specialist is set for a strong close to the year, with a positive outlook extending into FY26, according to a recent research report. The firm’s robust performance is expected to be driven by a record outstanding order book and stable gross profit margins (GPM), leading to a reiterated Buy rating with a target price of MYR6.10, representing a 13% upside from the last traded price of MYR5.40.

Performance and Key Drivers

The company anticipates a stronger fourth quarter of 2025, buoyed by seasonal revenue trends and underpinned by a substantial MYR1.6 billion outstanding order book, which management hails as the highest level ever achieved. This strong pipeline is expected to keep the firm busy well into FY27. A significant factor contributing to confidence in sustained profitability is the advanced engineering segment, which comprises over two-thirds (69%) of the outstanding order book. These high-yielding jobs are crucial in maintaining robust gross profit margins.

Despite the overall positive trajectory, the company faces some challenges, particularly weaker sales in China due to delays in receiving necessary tools. However, stronger contributions from its operations in Singapore and Malaysia are expected to mitigate the impact of these regional headwinds.

Expanding Market Opportunities

The firm’s tender book reached MYR4.6 billion as of September 2025, with a substantial 40% (MYR1.9 billion) originating from India. Europe now stands as the second-largest market for tenders at MYR1.5 billion, followed by Singapore (MYR415 million), Taiwan (MYR325 million), Malaysia (MYR314 million), and China (MYR204 million). Management projects further expansion in the tender book through FY26, driven by over USD100 billion in foundry investments across its existing markets. India’s tender book alone could potentially exceed MYR2 billion, with outcomes expected by 2Q26. The company is also strategically positioned to secure high-bandwidth memory hook-up jobs for a US-based customer in Singapore.

Strategic Ventures and Financial Health

The company is actively pursuing new growth avenues, including advanced discussions for bio-compressed natural gas (Bio-CNG) ventures. These initiatives involve producing bio-methane from palm oil milling effluent (POME) through anaerobic digestion and upgrading processes. The firm is exploring two models for deployment: establishing mini upgrading sites (costing MYR10-12 million each) near off-take sources, or investing in a centralized production facility (MYR400-600 million).

Financially, the group reported a net cash balance of MYR292.6 million in 3Q25, partially supported by proceeds from warrant conversions. Further warrant exercises are anticipated to raise approximately MYR140 million. While the outlook is largely positive, key downside risks include potential weaker-than-expected earnings or margins, delays in project execution, and lower-than-expected order book replenishment rates.

Outlook

Overall, the investment bank remains confident in the company’s ability to maintain its growth momentum, backed by its strategic market positioning, expanding tender book, and focus on high-yielding advanced engineering projects. The Buy recommendation is maintained, reflecting continued optimism for its future performance.