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Tuesday, September 19, 2017

AmInvest Research ups Kimlun fair value to RM2.76

Monday, 18 Sep 20178:51 AM MYT

KUALA LUMPUR: AmInvestment Bank Research has raised the forecasts for construction company Kimlun Corp for the financial years (FY) 2017 to 2019 as it maintains its Buy call.

It had on Monday raised the forecasts for FY17-19 by 2%, 8% and 10% and increased the fair value (FV) by 8% to RM2.76 from RM2.61 and maintained its Buy call.

“Our FV is based on 12 times revised FY18F fully diluted EPS of 23 sen, which is in line with our one-year forward target PE of 10 times to 12 times for small-cap construction stocks.

“This follows the award to Kimlun of a RM214.8mil contract by Hillcrest Gardens Sdn Bhd for the construction of two condominium blocks in Mukim Petaling, Selangor,” it said.

AmInvest Research said the latest contract has boosted Kimlun’s year-to-date construction job wins to RM820mil, surpassing its target of RM700mil for full-year FY17F.

“We therefore raise our assumption for FY17F construction job wins to RM900mil, resulting in the above mentioned earnings upgrades. For FY18-19F, we keep our assumption for construction job wins at a more normalised level of RM700mil annually,” it said.

The research house said with the latest contract, it estimates that Kimlun’s outstanding construction order book now stands at about RM2.2bil which will keep it busy at least for the next 12-18 months.

“We continue to like Kimlun as it is a good proxy to the booming local construction sector given its involvement in the MRT2 (supply of precast concrete segments), Pan Borneo Highway and the construction of affordable housing.

“We project Kimlun's FD EPS to contract by 20.0% in FY17F from a high base a year ago (largely due to lumpy variation order claims recognised during the year).

“Its earnings growth momentum should resume in FY18F (+26.8%) underpinned largely by the recovery in manufacturing earnings as production and delivery of the MRT2 and Eastern Rail Link (Singapore) orders gather pace,” said the research house.

AmInvest Research said Kimlun's earnings profile has improved tremendously as it no longer relies solely on residential building jobs.

It has expanded to the construction of a hospital (Gleneagles Medini, RM105mil), a shopping mall (IGB's Southkey Megamall, RM38mil), hostels (Sime Darby's Pagoh Education Hub, RM38mil) and a government office (Johor Bahru City Council complex, RM263mil), as well as infrastructure (a section of Pan Borneo Highway, RM1.46bil, via a 30%-owned JV with Zecon).

Similarly, its manufacturing unit has widened its product offering with the latest being rail sleepers and parapet walls.


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