KUALA LUMPUR (Sept 12): Public Investment Bank Bhd Research had initiated coverage on KKB Engineering Berhad (KKB) with a “Neutral” rating at 87 sen with a target price of 95 sen and said KKB started back in 1962 as a steel fabrication company in Sarawak.

In a note today, the research house said that currently, the Group’s core businesses are divided into two main sectors, engineering and manufacturing.

The research house said that traditionally, the key profit driver is KKB’s manufacturing division but profits are now erratic due to lack of long-term contracts (with one key project having expired in 2016).

It said that additionally, KKB’s oil and gas division’s (on-shore fabrication) gestation period is taking longer than expected due to low oil prices currently and oversupply of fabrication yards.

“Going forward, KKB is positive that it could still benefit from the gradual return of oil and gas contracts especially in Sarawak and potentially participate in the construction of power plants with its Chinese partner.

“While waiting for new growth drivers to come into fruition however, we believe earnings are expected to be patchy in the near term.

“We initiate coverage on KKB with a Neutral call and a target price pegged at c.0.9x to book value, suggesting fair value of 95 sen,” it said.