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Monday, September 9, 2013

Kimlun Corporation - Record New Wins


Maintain BUY. Kimlun has clinched two new sizeable projects in Iskandar Malaysia with a total value of MYR326m, bringing total construction wins YTD to MYR1.0b, a record high for the company. We are raising our FY13-15 EPS forecasts by 2%/4%/7% as we impute for the stronger-than-expected job wins in YTD FY13. Consequently, our TP is raised to MYR2.38 (from MYR2.30) based on an unchanged 10x 2014 PER. Trading at 1-year forward PER of 8x, valuation is relatively undemanding compared to its big-cap peers. Maintain BUY.

Sizeable jobs secured. Kimlun has been awarded two construction projects at Iskandar, totaling MYR326m. The details of the projects are: (i) MYR210m service apartments works from UEM Sunrise, to be completed in 30 months, and (ii) MYR116m commercial buildings from IOI Properties, to be completed in 12 months. Assuming a net margin of 5%, we estimate a net profit contribution of MYR2m/MYR9m/MYR4m (or 4%/17%/7% of total net profit contributions) over FY13-15.

Record win rate. Kimlun’s job replenishment rate has accelerated over the past two months (Aug-Sep: 68% of total wins of MYR1.0b YTD) and we believe it was driven by the post-election pent-up demand. We estimate that Kimlun’s total outstanding orderbook stands at approximately MYR2.0b presently (construction: MYR1.6b, manufacturing: MYR400m), much higher than the MYR1.6b as at Dec 2012 and should support earnings growth ahead.

Raising forecasts. Following the lumpy wins post-election, we expect job wins momentum to slow in 4Q13 as Kimlun’s job capacity is constrained by its manpower size. We raised our FY13 new job assumption for construction to MYR1.1b (from MYR800m) but maintain our FY14-15 job win assumptions at MYR900m and MYR950m respectively. Consequently, our FY13-15 EPS is raised by 2%/4%/7%

Source: Maybank Research - 9 Sep 2013

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