KUALA LUMPUR: KKB Engineering Bhd is expected to be a potential beneficiary of upcoming infrastructure projects in Sarawak, mainly highways.
In a note today, RHB Research said that KKB, via its subsidiary, KKB-WCT JV, has been shortlisted to bid for the Second Trunk Road (STR) and Sarawak Coastal Highway (SCH) projects in Sarawak, with a total estimated cost of RM11 billion.
The firm said other opportunities might come from the higher allocation of RM4 billion from RM2.8 billion for the Sarawak Water Supply Grid Programme (SWGP).
"KKB is no stranger to the programme, having clinched about RM250 million worth of projects under its first phase.
"Therefore, it stands a high chance of being involved in the second phase of SWGP, possibly later this year or next," it said.
Meanwhile, RHB Research said higher Petronas capital expenditure (capex) should boost KKB's steel fabrication business for oil and gas (O&G) platforms via its subsidiary, OceanMight.
The bank-backed research firm said that with KKB being a Petronas-licensed fabrication yard, such a licence is not easily attainable and constitutes a high entry barrier, with only two licence holders in Sarawak, including KKB.
"Moreover, OceanMight's tie-up with Samsung Engineering could pave the way for overseas job opportunities.
"To date, OceanMight has been awarded 14 contracts worth circa RM1 billion in total," it said.
RHB Research advised investors to look past the slowdown of KKB's year-to-date (YTD) financial year 2022 (FY22) job wins.
This is because the firm sees KKB in a sweet spot to gain from the upcoming projects in Sarawak from FY23, backed by its net cash position.
"As such, FY22 earnings should fall 18 per cent year-on-year (YoY) before a more than 50 per cent YoY growth in FY23.
"We initiated coverage with a Buy on KKB with a target price of RM1.85," it added.