PETALING JAYA: Kawan Renergy Bhd

’s near-term earnings visibility is supported by its RM128mil order book, following a “significantly weaker” earnings performance in the second quarter of financial year 2026 (2Q26) due to cost overruns on its Sabah power plant project.

Kenanga Research said the group’s 2Q26 results missed its expectations with core net profit of RM0.2mil bringing 6M26 core net profit to RM6.6mil, accounting for 25% to 30% of its and consensus forecasts.

“Earnings were significantly weaker due to cost overruns on a Sabah power plant project arising from additional scope of works beyond the initial agreement, higher labour and sub-contractor costs, and expanded sales and service tax scope effective September 2025,” the research house said in a report yesterday.

Kenanga Research said it expects earnings to recover in 3Q26, as the majority of the Sabah project’s cost overruns have already been incurred during the quarter.

“The group’s current order book stands at RM128mil, of which RM71mil comprises a recently secured purchase order that is expected to provide earnings visibility from 3Q26 onwards. The management is in discussions with the main contractor on the recoverability of additional costs incurred.”

Following the earnings surprise, it revised its margin assumptions downward, primarily to reflect higher energy costs stemming from the Middle East conflict, as well as increased subcontractor costs.