KGB: Strong Performance Driven by Diversified Growth and Cost Efficiencies, ‘BUY’ Rating Maintained

A recent investment bank research report indicates that the company is poised for a strong financial close to 2025, driven by robust operational performance and strategic expansion. Analysts maintain a “BUY” recommendation, citing significant growth potential anchored by a healthy order book and promising new ventures.

Performance Review

The company is anticipated to report strong core earnings for the fourth quarter of 2025, estimated between MYR48 million and MYR53 million. This represents a substantial year-on-year increase of 25-33%, benefiting from a low base in 4Q24, seasonally higher revenues, and sustained gross profit margins (GPM). This strong finish underscores the company’s unique and valuable position within the upstream and front-end semiconductor value chain, supported by its expanding global reach and advanced technical capabilities.

Strategic Growth and Future Outlook

Looking ahead, fiscal year 2026 is projected to be another robust year, underpinned by several key drivers. The company boasts an impressive tenderbook of MYR4.6 billion and an orderbook of MYR1.6 billion as of 3Q25. A strategic focus on higher-yield advanced engineering jobs, coupled with entry into new markets, is expected to fuel continued growth. While management acknowledged potential competitive pressures in its European tenderbook for base-build jobs, anticipated upsized tenders in India, new Singapore projects, and an expanding domestic tenderbook are expected to effectively offset these challenges. Opportunities in Japan and the US are also being actively pursued, including potential mergers and acquisitions.

Green Ventures and Sustainability Initiatives

The company is also strategically positioned to benefit from Malaysia’s long-term energy transition roadmap. Significant progress is being made in its green ventures, particularly in the production of green gases and the provision of carbon capture solutions. Discussions are at advanced stages regarding bio-methane production using palm oil milling effluent (POME), which involves establishing mini upgrading sites or joint investments in a centralised production facility. These initiatives are expected to bolster the group’s recurring revenues over the long term.

Investment Recommendation and Key Risks

The “BUY” rating is maintained, reflecting confidence in the company’s double-digit earnings growth, record tenderbook, and improving margins. The exercise of remaining in-the-money warrants, set to expire in July, could raise approximately MYR141 million, potentially providing upside to future dividends, building on a strong 9M25 dividend per share of 9 sen (68% payout ratio). Key downside risks identified include softer-than-expected earnings or margins, weaker orderbook replenishment, and potential project execution delays.