KKB Engineering firing all cyclinders to ride o the O&G positive outlook

KKB Engineering Bhd is on a roll. It has closed at its multi-year high since 2020 on June 13, supported by a spike in trading volume.

It looks like follow-through buying may lift prices towards the historical resistance at RM1.98 and RM2.08 next.

The counter was trading at a 52-week low of RM1.32 last August before it surged to a high of RM1.89 in May.

Over the past year, it has jumped some 37% to close at RM1.85 on June 14.

The Sarawak-based steel fabrication firm has been rising high on the Sarawak theme.

It is also a proxy to pick up in the oil & gas sector especially in Sarawak.

In February, KKB subsidiary, OceanMight Sdn Bhd entered into a Memorandum of Understanding with Samsung Engineering Co Ltd.

Both parties want to collaborate on potential global projects in the oil and gas process module and structure sectors.

OceanMight along with Samsung Engineering may cooperate in the tendering for projects which may involve specialised scope of work and supply.

According to KKB’s latest annual report, OceanMight is a Petronas-licensed fabrication yard for offshore facilities construction.

KKB directly owns a 60.31% stake in OceanMight, followed by another 5.5% effective stake by virtue of its 40%-owned unit Edisi Optima Sdn Bhd’s 13.75% stake in the company.

The remaining 25.44% in OceanMight is owned by Annexe Fair Sdn Bhd.

Investors might remember that partnership and collaboration between OceanMight and Samsung Engineering is not new.

It was in Oct 2021 when the pair inked an MOU to collaborate in the bidding of tenders for unspecified projects worldwide.

No follow-ups were disclosed on the 2021 MOU, but OceanMight had in April 2023 received a RM111.6 million purchase order from Samsung Engineering for the module fabrication and supply of steel structures for Malaysia Shell R&M Onshore Gas Plant project in Bintulu, Sarawak.

KKB’s engineering division saw a 74% YoY PAT growth in 1Q24 due to higher progress billings for civil construction jobs for example, Pan Borneo Highway and steel fabrication works, eg Sarawak Shell (RM300mil) and the R&M onshore gas plant in Bintulu (RM112.6mil).

Meanwhile, the manufacturing arm recorded a PAT of RM300,000 (1Q23: RM0.8m loss-after-tax), mainly backed by the export of mild steel pipes to Brunei and other ad-hoc customers.

KKB has an outstanding orderbook of RM400 million in the first quarter 2024 with RM38mil jobs clinched in 1Q24.

The company in the midst of participating in bids, particularly oil and gas ones, with an estimated amount that could exceed RM1.5 bil based on 25%-35% success rate.

Investors are certainly excited by its huge opportunities in Sarawak and given its track record in steel fabrication work, it should stand to bag more jobs moving forward.