KUALA LUMPUR: OSK Research says KKB Engineering’s share price has appreciated by 64.9% over the past two weeks after the announcement of its above expectations FY09 results as well as bonus issue and share split on Feb 23.

“We think the appreciation could partly be due to the anticipation of more contracts awarded closer to the state elections (in Sarawak) as well as excitement over the corporate exercises,” it said on Thursday, March 11.

KKB is bidding for new projects worth between RM280 million and RM350 million in both Sabah and Sarawak. KKB is primarily involved in steel fabrication and the manufacture of steel pipes and LPG cylinders.

OSK Research said while it maintained its FY10 and FY11 numbers, it noted that interest on the company may be sustained until the bonus issue ex-date.

This is further reinforced by the short term Sarawak theme play it is seeing in the market. It revised its TP of RM4.36 (ex price: RM1.36) to RM7.01 (ex price: RM2.19) as it accords a 10% premium to its previous 10x PER and roll over its valuation to FY11 EPS.

“However, we are downgrading the stock to a Trading Buy recommendation from a Buy previously, given the risk of its share price retracing to our original TP post ex-bonus issue as well as the short term nature of the Sarawak theme,” it said.