KKB: New Contract Win Fuels Optimism, Analyst Reaffirms Buy Rating

An analyst from RHB has reaffirmed a BUY recommendation for KKB Engineering, setting a new target price of MYR1.42, which represents an upside of 20% from the last traded price of MYR1.18. This positive outlook follows the company’s recent securing of a significant new contract, even as recent earnings adjustments reflect a challenging operating environment.

Performance Review and New Mandate

The company’s oil & gas fabrication arm, OceanMight, recently secured a Letter of Award from Petronas Carigali, valued at MYR212 million. This contract is for the provision of minor Engineering, Procurement, and Construction (EPC) works on fixed offshore structures and a host tie-in at the Erb West for the Belud South Greenfield Development project. The project is scheduled for completion within 13 months, commencing January 15, 2026. This mandate marks KKB Engineering’s first major job win for fiscal year 2026.

This new award is particularly timely, as the company’s engineering division reported an after-tax loss of MYR7.4 million in the third quarter of fiscal year 2025, a notable decline from a MYR11 million profit in the same period of 2024. This downturn was primarily attributed to two major projects—the Sarawak Shell project and the Rosmari and Marjoram (R&M) onshore gas plant—reaching their final conclusion stages. The company has been in a phase of resetting its activities in FY25, with projects winding down and a continuous effort to secure new mandates. The last time the company secured a contract exceeding MYR200 million was in January 2023.

Orderbook and Future Outlook

As of the end of the fourth quarter of fiscal year 2025, KKB Engineering’s outstanding orderbook stood at approximately MYR55 million, a decrease from MYR85 million at the end of 3Q25. However, the group’s current tenderbook for engineering, construction, and manufacturing is estimated at a robust MYR700 million. Furthermore, the analyst projects that the company will tender for approximately MYR1 billion worth of oil & gas fabrication-related jobs, with an estimated success rate of 30-40%. These potential awards are expected to materialize from the first quarter of 2026 onwards.

Despite the positive sentiment from the new contract, RHB has revised down its FY25-27F earnings forecasts by 14%, 4%, and 13% respectively. This adjustment reflects the absence of new job wins in FY25, which fell short of the previous MYR100 million target. The revised target price of MYR1.42 is derived by pegging the FY26F EPS to an unchanged target Price-to-Earnings (P/E) ratio of 17x, incorporating a 2% ESG premium. This valuation is considered justified given the company’s potential to benefit from Sarawak’s increased allocation of MYR6 billion for 2026 under the Budget 2026.

Key Rerating Catalysts and Risks

Potential rerating catalysts for KKB Engineering include faster-than-expected contract wins in the water infrastructure sector, an area where the company last secured a project in December 2024. Upcoming water supply schemes in Sabah, particularly those that Gamuda could secure, also represent significant potential job opportunities for KKB.

Conversely, a key downside risk highlighted by the analyst is a slower-than-expected trend in job replenishment.