Kawan Renergy Berhad - Secures RM12.8m EPC Contract
Fri, 24-Oct-2025 07:47 am
by Tan Sue Wen • Apex Research

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KENERGY (0307)

Target Price (RM)

1.02

Recommendation

Buy

  • KENERGY has secured a RM12.8m contract from Govi Cast Sdn Bhd for the engineering, procurement, and construction (EPC) of an additional chemical production line at its Port Klang factory. This award lifts the Group’s unbilled order book to RM124.8m, equivalent to 1.1x FY24 revenue. 

  • We view the contract positively, as the short six-month project cycle allows for accelerated earnings recognition, with the majority of contribution expected in FY26F.

  • No change to our earnings forecasts as the contract win is within our order book replenishment assumption.

  • Maintain BUY with an unchanged target price of RM1.02, based on 19x FY26F EPS of 5.3 sen.

 

RM12.8m Contract. KENERGY has secured a RM12.8m contract from Govi Cast Sdn Bhd (GCSB) for the engineering, procurement and construction (EPC) of an additional Chemical Production Line (Line 3) at GCSB’s Port Klang factory. The project entails the design, supply, installation, testing and commissioning of process equipment and supporting utilities for the new line, aimed at expanding GCSB’s production capacity for calcium stearate emulsion and dispersion. The contract is scheduled for delivery and commissioning by 1 May 2026.

 

Our Take. We view the contract positively, as the short project cycle (c.6 months) allows for accelerated earnings recognition, with the majority of contribution expected in FY26F. Assuming a gross profit margin of 15%, the project should generate c.RM1.9m in gross profit over its duration, representing about 3.8% of our FY26F forecast. Execution risk is deemed minimal given Kawan Engineering’s established track record in industrial process plant EPC works. Post-award, the Group’s outstanding order book is estimated at RM124.8m (1.1x FY24 revenue), largely driven by projects from the renewable energy and cogeneration segments.

 

Outlook. Order book replenishment momentum is set to gradually increase over the coming quarters, supported by ongoing project flows in industrial process EPC and cogeneration segments, alongside rising exposure to data centre-related power solutions. The Group is well positioned to capitalise on Malaysia’s expanding Tier-4 data centre investments and growing demand for energy-efficiency projects. Its engineering expertise underpins the delivery of high-performance energy-efficient solutions, while its distributorship of Rolls-Royce generation sets strengthens its presence in mission-critical power applications.

 

Earnings revision. No change to our earnings forecasts as the contract win is within our order book replenishment assumption of RM155m for FY25.

 

Valuation & Recommendation. Maintain our BUY recommendation on KENERGY with an unchanged TP of RM1.02, based on 19x FY26F EPS of 5.3sen. We remain positive on the Group’s outlook, supported by: (i) up to 60% in-house component fabrication, enhancing cost control and project execution; and (ii) distribution status for Rolls-Royce generation sets and Solar Turbines, providing exposure to the accelerating data centre investment cycle and growing mission-critical power opportunities.

 

Risks. Rising steel and metal plate prices and slower-than-expected order book replenishment.

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