RHB Research has maintained its BUY call on KKB Engineering Bhd and raised its target price to RM1.72 from RM1.45, following the group’s RM517 million contract win for the Samalaju Water Supply Phase 2 project.
The new target price implies 43% upside, alongside an estimated FY2027 dividend yield of about 4%, the research house said.
RHB described the Samalaju award as KKB’s biggest water supply project in some time. The scope includes a 160 million litres per day (MLD) raw water intake at Batang Kemena near Labang, together with a raw water pumping main and associated works, as well as a 120MLD water treatment plant at Samalaju and related facilities.
The project is expected to strengthen water supply infrastructure and support the long-term development of Samalaju.
RHB noted that KKB had previously secured more than RM100 million worth of contracts under the Sarawak Water Supply Grid Programme between 2019 and 2020.
With the latest project and the previously secured Belud South development, RHB estimates KKB’s outstanding order book at about RM1.2 billion.
Its tender book is estimated at around RM380 million, covering engineering, construction, manufacturing and water supply works, as well as oil and gas opportunities in Sabah and Sarawak.
RHB expects the tender pipeline to expand further as KKB continues bidding for new projects.
The group has also secured fixed offshore structure engineering, procurement and construction works for the SK408 Teja & Pepulut and Temu & Inai field development projects from Sarawak Shell, alongside supply orders from Hock Seng Lee and Bumia, collectively worth RM462 million.
KKB’s year-to-date new contract wins have now reached about RM1.3 billion, more than double RHB’s original FY2026 replenishment assumption of RM600 million. The research house consequently raised its FY2026 job replenishment target to RM1.3 billion.
Following the revision, RHB increased its earnings forecasts by 4%, 19% and 26% across its forecast years.
Its new RM1.72 target price is based on 17 times FY2027 forecast earnings, with a 2% environmental, social and governance premium applied. KKB is currently valued at about 10.7 times FY2027 forecast earnings, below the five-year mean of 15 times cited by RHB.
Potential catalysts include further water infrastructure contract wins, particularly as the Sarawak government looks to take over 79 federally funded water supply projects worth about RM3.5 billion statewide.
RHB also highlighted KKB’s RM221 million net cash position as at end-2Q2026 as supportive of its ability to undertake existing and potential projects. The key downside risk is slower-than-expected contract replenishment.
