OSK Research downgrades KKB To Sell, cuts fair value to RM1.34

KUALA LUMPUR (May 10): OSK Investment Research has downgraded KKB ENGINEERING BHD [] to a Sell and cut its fair value to RM1.34 from RM2 previously and said the company's 1QFY12 net profit of RM7.7 million (-60.8% y-o-y, +15.1% q-o-q) was 49.5% below its expectations.

The lacklustre performance was primarily due to weaker revenue from the engineering division which saw slower contract replenishment and heightened raw material costs, it said in a note Thursday.

"We think 2012 would be a challenging year in view of global economic and local political uncertainties and hence, we are tweaking down our earnings forecast and FV to RM1.34. We downgrade KKB to Sell," it said.



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KKB retreats on weaker 1Q earnings

KUALA LUMPUR (May 10): KKB ENGINEERING BHD []'s shares retreated on Thursday after its net profit for the first quarter ended Mar 31, 2012 fell 60.82% to RM7.71 million from RM19.68 million a year ago,

At 9.40m, KKB fell three sen to RM1.62 with 54,700 shares done.

The company atrributed the fall in earnings to the completion of major projects in 2011 and the absence of new projects for both its CONSTRUCTION [] and steel fabrication divisions.



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Stocks to Watch Southern Steel, Sunway, TRC Synergy, Malayan Flour Mills, KKB Engineering, Sime Darby, MMHE

KUALA LUMPUR (May 10): Investor sentiment at Bursa Malaysia on Thursday may remain weak in line with the gloomy sentiment at most global markets, as political uncertainties in Greece and the rising costs of fixing Spain's banks ignited worries that the eurozone's debt crisis was worsening.

The concerns over Europe added to worries about the impact of softer growth in the US on the global economic outlook, causing a broad retreat from risky assets with world shares falling, oil prices down for a sixth straight session and the commodity-linked Australian dollar hitting new lows, according to Reuters.

The market's immediate attention was on Athens where efforts to form a government were expected to fail, putting its ability to meet the terms of its bailout deal in doubt and raising the possibility of Greece being forced out of the euro, it said.

Among the stocks that could be in focus on Thursday are SOUTHERN STEEL BHD [], Sunway Bhd, TRC SYNERGY BHD [], MALAYAN FLOUR MILLS BHD [], KKB ENGINEERING BHD [], SIME DARBY BHD [] and Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE).

Southern Steel has entered into a joint venture (JV) agreement with Belgium-based NV Bekaert SA (NV BK) to form a JV company in Singapore to manufacture specified steel wires in the Asean region. It said in a filing on on Wednesday that it would hold 45% in the JV, with NV BK holding the remaining 55%.

Sunway Bhd's unit Sunway CONSTRUCTION [] Sdn Bhd and TRC Synergy Bhd's subsidiary Trans Resources Corporation Sdn Bhd were among the companies that secured four additional construction packages worth RM3.22 billion for the Sungai Buloh-Kajang MRT.

Sunway Construction was awarded package V4 worth RM1.17 billion, for works between Section 17, Petaling Jaya and the Semantan Portal, while Trans Resources was awarded the Depot package worth RM458.98 million for works related to the Sungai Buloh depot in an open tender category.

Malayan Flour Mills is allocating some RM120 million to expand its flour factory and poultry operations in Malaysia over the next two years. Managing director Teh Wee Chye said the capital expenditure will be financed with the firm's internal funds and bank loans. It has also earmarked US$15 million (RM46.05 million) to expand its two flour factories in Vietnam, he said.

KKB Engineering's net profit for the first quarter ended Mar 31, 2012 fell 60.82% to RM7.71 million from RM19.68 million a year ago, due to the completion of major projects in 2011 and the absence of new projects for both its construction and steel fabrication divisions.

Sime Darby Property and CapitaMalls Asia Ltd will jointly develop a RM500 million shopping mall in Taman Melawati in the Klang Valley. In a joint statement Wednesday, the two companies said they had entered into a conditional agreement to form a 50:50 joint venture to develop the mall on a freehold site in Taman Melawati.

MMHE's net profit for the first quarter ended Mar 31, 2012 fell 39.16% to RM78.27 million from RM128.64 million a year ago, due to the completion of contracts under its engineering and construction arm as well as its marine conversion and repair arm.



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KKB Engineering 1Q net profit falls 60% to RM7.71m

KUALA LUMPUR (May 9): KKB ENGINEERING BHD []'s net profit for the first quarter ended Mar 31, 2012 fell 60.82% to RM7.71 million from RM19.68 million a year ago, due to the completion of major projects in 2011 and the absence of new projects for both its CONSTRUCTION [] and steel fabrication divisions.

In a statement on Bursa Malaysia on Wednesday, it said that its revenue for the quarter decreased by 11.71% to RM52.54 million from RM59.51 million a year earlier.

Earnings per share were 2.99 sen compared to 7.63 sen, while net assets per share was 99 sen.

Reviewing its performance, KKB said that although revenue for its construction and steel fabrication divisions dropped 80.9% to RM5.1 million from RM26.8 million, its manufacturing arm managed to offset lower sales of liquified petroleum gas cylinders with strong sales of steel pipes by recording a 211.1% jump in revenue to RM30.8 million from RM9.9 million for the same quarter last year.

"The increased competitive nature of the engineering sector’s businesses coupled with the increasing cost of sales resulting from higher raw material costs have contributed to the lower earnings of the group," it added.



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Blue chips cautious in early trade, eyes on Greece again

KUALA LUMPUR (Feb 21): Blue chips on Bursa Malaysia slipped in early trade on Tuesday as investors awaited the outcome of a 130 billion ero rescue for Greece.

Reuters reported that Euro zone finance ministers were expected to approve the rescue plan with strict conditions after months of uncertainty that has shaken the currency bloc, although work remained to be done to make the numbers add up.

At 9.30am, the FBM KLCI was down 1.16 points to 1,559.41. Turnover was 282.20 million shares valued at RM133.63 million. However, gainers led losers 174 to 161 while 238 stocks were unchanged.

Among the decliners were Esso, down 12 sen to RM3.64 after its earnings fell. CI Holdings lost seven sen to Rm1.26, Top Glove six sen to RM4.86, KLK also six sen to RM24.08 and Bursa Malaysia five sen to RM7.35.

Among the lower liners SPB lost 10 sen to RM3.61, Jobstreet five sen to RM2.16 and KKB four sen to RM1.71.



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KKB Engr rises on pact with Brooke Dockyard

KKB Engineering Bhd rose to a one- week high in Kuala Lumpur trading after saying it plans to collaborate with Brooke Dockyard & Engineering Works Corp on steel fabrication and other businesses.

The stock advanced 1.8 percent to RM1.72 at 9:21 a.m. local time, set for its highest close since Nov. 23. -- Bloomberg



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Results: Xidelang Q3 pre-tax profit improves

# Xidelang Holdings Ltd posted a higher pre-tax profit of RM32.11 million for the third quarter ended Sept 30, 2011 from RM29.59 million recorded in the same period last year.

In filing to Bursa Malaysia today, the company said its revenue rose to RM132.94 million from RM125.25 million previously.

The improvement was attributed to an increase in brand awareness, continuous research and development, increased consumer demands resulting in higher sales for the period under review.


# KKB Engineering Bhd posted a 63.5 per cent drop in pre-tax profit to RM11.32 million for the third quarter ended Sept 30, 2011, from RM31.02 million, recorded in the same period last year.

In a filing to Bursa Malaysia today, the company said revenue slipped to RM60.20 million, from RM68.63 million, recorded in the previous corresponding period.

Going forward, it expects manufacturing and engineering activities to contribute positively to the group's performance in view of the vast opportunities existing in the Sarawak Corridor of Renewable Energy.


# Bintai Kinden Corporation Bhd recorded a higher pre-tax profit of RM6.13 million for the second quarter ended Sept 30, 2011 compared with RM1.91 million in the same period last year.

In a filing to Bursa Malaysia today, the specialist engineering company said revenue for the period however decreased to RM57.24 million compared with RM91.68 million previously.

The company expects to see a satisfactory performance for this financial year with its current projects in hand for this financial year.


# United U-LI Corporation Bhd registered a lower pre-tax profit of RM2.58 million for the third qurter ended Sept 30, 2011 compared with RM4.76 million in the same period last year.

In a filing to Bursa Malaysia today, it said revenue for the period however rose to RM34.2 million compared with RM30.74 million previously.


# Mega First Corporation Bhd (MFCB) posted a higher pre-tax profit of RM36.348 million for the third quarter ended Sept 30, 2011 from RM30.082 million chalked up in the same period last year.

In a filing to Bursa Malaysia today, the company said revenue increased to RM151.962 million compared with RM127.049 million registered previously.

MFCB said the better pre-tax profit was largely attributable to higher contribution from the power and limestone divisions and gains from the disposal of quoted shares, partially offset, by lower contribution from the property and engineering divisions.


# MNRB Holdings Bhd posted a pre-tax loss of RM337,000 for the second quarter ended Sept 30, 2011 against a pre-tax profit of RM27.94 million in the same period last year.

The group recorded a pre-tax loss in the current quarter due to the provision made by the group's reinsurance subsidiary for the Thailand flood loss, the company said in filing to Bursa Malaysia today.

Revenue, however, rose to RM362.65 million from RM338.97 million.

MNRB attributed the higher revenue to the increase in the gross premium written by the reinsurance subsidiary and the increase in the wakalah fees earned by the takaful and retakaful operator.


# Can-One Bhd posted a higher pre-tax profit of RM9.794 million for the third quarter ended Sept 30, 2011 from RM6.747 million recorded in the same period last year.

In a filing to Bursa Malaysia today, the investment holding company with its main activities in the manufacture of cans as well as food products, said its revenue rose to RM160.555 million, from RM115.244 million registered in the same quarter previously.

The improvement in revenue was attributed to increase in production efficiency and economies of larger scale production.

It added the increase in production capacity and demand for liquid milk products also contributed to the growth. -- Bernama



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KKB Engineering — Growing with Score

KKB Engineering Bhd (Nov 3, RM1.72)
Maintain buy with revised fair value of RM2.20 from RM2.83: The presence of KKB plus Samalaju Industrial Park’s attraction to investors given its good basic infrastructure, available water supply and huge capacity to supply electricity at competitive pricing, we expect some sizeable contracts to come KKB’s way in FY12 and FY13.

While we like the company’s solid balance sheet and potential to reap enormous earnings from the Sarawak Corridor of Renewable Energy (Score), we maintain our “buy” recommendation but revise lower our fair value to RM2.20 on incorporating lower earnings arising from the temporary slowdown of contracts flow this year, and on applying a more conservative 8 times price earnings ratio (PER).

Having clinched its first job in Samalaju via a water supply project in Bintulu worth RM196 million as well as the contract to carry out earthworks for OM Materials, KKB is positioned to make its presence felt in Samalaju Industrial Park. As the company has been pre-qualified to construct plants for Tokuyama, Asia Mineral Ltd, OM Materials and Press Metal’s investments in Samalaju, we expect it to secure more sizeable contracts here in the near term.

Phase 1 of the company’s expansion plan involves doubling the fabrication capacity of its new deepriver front yard to 30,000 tonnes per annum. This has just been completed while construction of a jetty to facilitate access to Sungai Sarawak is still in progress. Phases 2 and 3 are scheduled to be completed by 2014. By then, KKB’s earnings would rise to another level, boosted by the additional fabrication capacity and logistics advantage from the deepwater front and jetty

The developments in Score slowed down in 1H to make way for the state elections. Nevertheless, we are seeing a pick-up in contracts flow of late and KKB recently secured some contracts, although these are small. We believe that Score projects will be revived in FY12 given that the construction of most plants in Samalaju will kickstart next year.

We remain positive on KKB’s progress although its share price is down 21% from its 2011 peak in tandem with the market-wide correction. As we like the company’s strong balance sheet and good track record, we maintain our “buy” recommendation. However, we prefer to lower our estimates for the next two years and slash our PER parameter to 8 times from 10 times, for a new fair value of RM2.20. — OSK Research, Nov 3


This article appeared in The Edge Financial Daily, November 4, 2011.