KKB: Performance Meets Expectations as Order Book Strengthens, BUY Rating Reaffirmed

For the full year 2025 (FY25), the company reported a core net profit of MYR15 million, which aligned precisely with expectations, fulfilling 99.9% of the projection. This performance, however, represents a 43% year-on-year decrease. The engineering division faced challenges, recording an after-tax loss of MYR1.8 million in FY25. This was primarily attributed to the conclusion of two major projects – the Sarawak Shell project (c.MYR300 million) and the Rosmari and Marjoram onshore gas plant (MYR112.6 million) – coupled with slower contract rollouts from major oil companies throughout 2025. In contrast, the manufacturing segment demonstrated robust growth, posting a profit after tax (PAT) of MYR16.5 million in FY25, a significant turnaround from a net loss of MYR0.5 million in FY24. This improvement was largely driven by the supply of mild steel concrete-lined pipes for water treatment plants in Sibu and Serian.

Order Book and Future Outlook

Despite a quiet FY25 for new project awards, the company has started FY26 strongly, having clinched approximately MYR292 million worth of new jobs in January. This significant replenishment is expected to bolster activity following the tail-end of numerous projects in FY25. The estimated remaining order book stands at approximately MYR345 million, an increase from MYR55 million at the end of 4Q25. Furthermore, the company’s tender book for engineering, construction, and manufacturing projects is substantial, valued at around MYR1.9 billion, with an additional MYR212 million in tenders related to oil and gas fabrication projects, primarily in Sarawak and Sabah. Earnings estimates for the group remain unchanged, with an introduction of FY28F earnings assuming a MYR350 million job replenishment.

Investment Recommendation

The investment bank reiterates its BUY recommendation, maintaining a target price of MYR1.42, which implies a 15% upside. This target price is derived by pegging the FY26F EPS to an unchanged target P/E of 17x, incorporating a 2% ESG premium. This valuation is supported by the company’s potential to benefit from higher Budget 2026 allocations for Sarawak, which increased to MYR6 billion (from MYR5.9 billion in 2025).

Key Catalysts and Risks

Potential rerating catalysts include faster-than-expected contract wins for oil & gas wellhead platforms (WHPs), particularly with Petronas planning four and six WHPs for fabrication in CY26 and CY27, respectively. The Malaysia Bid Round 2026, featuring three high-potential blocks in the West Sarawak Basin, also presents a significant opportunity. Conversely, the primary downside risk remains slower-than-expected job replenishment trends.