KKB (9466) : RHB Research downgrades KKB Engineering to Sell
KUALA LUMPUR: RHB Research has downgraded KKB Engineering to a Sell from Trading Buy with a target price of RM1.38 and trimmed its target P/E to 12 times FY15F from 14 times as it removed the premium it had incorporated earlier due to its exposure to the O&G industry.
In a note on Monday, the research house said together with the poor contract win for its fabrication units to-date and waning hope on its associate winning more lucrative O&G contracts in the near future on weakening oil prices, RHB is cutting KKB's contract win rate for the next two years.
"We cut our FY14/15 earnings estimates by a hefty 64.4%/42.0% respectively, while we introduce our FY16 projection," it noted.
It said KKB’s associate, Ocean Might Sdn Bhd, became a licensed supplier of Petronas under the category of onshore fabrication for offshore major construction in early 2013.
"We were initially encouraged that this associate finally won its first fabrication works in September as it was a critical breakthrough into the lucrative O&G industry.
"However, the weakening oil prices, which recently brokeits support level of US$80 a barrel, suggest that a majority of new O&G projects may be put on hold, thus limiting the number of fabrication jobs available in the market," it said.
Being the new kid on the block, its unit may also find it tougher to compete with its peers on the lack of track record, RHB said.
http://www.thestar.com.my
KUALA LUMPUR: RHB Research has downgraded KKB Engineering to a Sell from Trading Buy with a target price of RM1.38 and trimmed its target P/E to 12 times FY15F from 14 times as it removed the premium it had incorporated earlier due to its exposure to the O&G industry.
In a note on Monday, the research house said together with the poor contract win for its fabrication units to-date and waning hope on its associate winning more lucrative O&G contracts in the near future on weakening oil prices, RHB is cutting KKB's contract win rate for the next two years.
"We cut our FY14/15 earnings estimates by a hefty 64.4%/42.0% respectively, while we introduce our FY16 projection," it noted.
It said KKB’s associate, Ocean Might Sdn Bhd, became a licensed supplier of Petronas under the category of onshore fabrication for offshore major construction in early 2013.
"We were initially encouraged that this associate finally won its first fabrication works in September as it was a critical breakthrough into the lucrative O&G industry.
"However, the weakening oil prices, which recently brokeits support level of US$80 a barrel, suggest that a majority of new O&G projects may be put on hold, thus limiting the number of fabrication jobs available in the market," it said.
Being the new kid on the block, its unit may also find it tougher to compete with its peers on the lack of track record, RHB said.
http://www.thestar.com.my
