KKB: Construction Firm Surpasses Expectations on Cost Efficiencies
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading construction and engineering firm has reported robust financial performance, exceeding market expectations for its fourth quarter of fiscal year 2025. The positive results were primarily attributed to effective cost management strategies, reinforcing the company’s strong operational capabilities.
Performance Review
The company’s latest earnings report highlighted a significant beat, driven by notable cost efficiencies. This strong performance comes amidst a backdrop of strategic project acquisitions. The company successfully secured a series of new orders in the fourth quarter, spanning critical sectors such as Oil & Gas Construction & Engineering, civil works, and the supply of mild steel cement line (MSCL) pipes and posts. These new contracts contributed to a cumulative value of approximately MYR80 million within a two-week period, bolstering the year-to-date FY25F order book to around MYR92 million. As of the fourth quarter of 2025, the outstanding order backlog stood at approximately MYR55 million.
Strategic Initiatives and Future Outlook
The company is actively pursuing new opportunities, with ongoing tenders for engineering, construction, and manufacturing projects valued at an estimated MYR300 million. Furthermore, the firm is tendering for substantial Oil & Gas fabrication-related jobs worth around MYR1 billion, with an estimated success rate of 30-40%, expected to be awarded from 4Q26 onwards. A significant portion of these upcoming wins is anticipated to align with Sarawak’s broader initiative towards achieving full water coverage by 2030, including involvement in projects under the Prime Minister’s Department and the Ministry of Finance, potentially benefiting from the MYR60 billion allocation under Budget 2026 for water supply coverage. Analysts view these developments as key catalysts for accelerated growth in the water infrastructure sector.
Challenges and Risks
While the outlook remains positive, the company acknowledges potential challenges such as softer utilization rates. Additionally, a key risk identified is slower-than-expected job replenishment trends, which could impact future revenue streams. However, the current robust order book and strategic tender pursuits are expected to mitigate these concerns.
Analyst Recommendation
Following the strong performance and positive outlook, TA SECURITIES has maintained its “BUY” recommendation for the company. The investment bank has also set a target price of RM0.25, representing an upside potential of 25.0% from the last traded price of RM0.20. This positive rating reflects confidence in the company’s ability to capitalize on its expanding order book and operational efficiencies.
