KUALA LUMPUR (June 27): MIDF Research has initiated coverage of KKB Engineering Bhd at RM1.40 with a “buy” rating and target price of RM1.50 and said the valuation was derived by pegging its FY23F core EPS of 9.7 sen to its target PER of 15.5 times.

In a note on Monday (June 27), the research house said Sarawak’s long-term growth story augurs well for KKB, which will translate into job wins and better earnings visibility.

MIDF said the target price of RM1.50 per share by pegging its FY23F core EPS of 9.7 sen to a target PER of 15.5 times, which is +0.25 SD above the group’s four-year mean PER is justified in view of the group’s normalising earnings after rebounding from its net loss in FY16 and the improved prospects of it securing more infrastructure and oil and gas related jobs in Sarawak.

“We are cautiously optimistic on KKB’s prospects as the growth story remains intact in Sarawak, of which the group is ready to pounce on available civil construction opportunities and steel fabrication jobs, based on its vast experience and robust balance sheet.

“We also like the fact that KKB is strengthening its foothold in the oil and gas scene locally and that its subsidiary OceanMight is a major Petronas licence holder for fabrication yard.

“KKB’s commitment to rewarding its shareholders annually and its strong net cash position also makes it an attractive counter,” it said.