KIMLUN (FV RM2.07 - BUY) FY11 Results Review: Another Noteworthy Year

KimLun’s FY11 net profit of RM41.8m  came in within our expectations and consensus at 102.2% and 98.1% of the respective full-year estimates. It declared a final DPS of 3.1 sen, bringing its FY11 DPS to 5.1 sen at a payout ratio of 27.4%. With the RM223m supply of SBGs  for the KV MRT already in its bag, we believe the next re-rating catalysts will likely be  the  supply  of  TLS for  the KV MRT SBK line, further jobs for the Singapore MRT expansion  and developments in  the Iskandar region. Hence, maintain BUY with our FV marginally lowered to RM2.07 to account for the potential 1H12 opex spike.

Numbers in line. KimLun’s FY11 revenue registered RM652.1m, up 23.6% y-o-y led by improvements in both its construction and concrete product divisions. EBIT closed the year at RM61.4m, marking a 21.6% improvement over the same period as  its margin declined slightly on higher depreciation and admin expenses. All in all, net profit inched up by a smaller quantum of 16.7% y-o-y to RM42.7m due to higher tax leakages, which saw a 300bps y-o-y jump in the effective tax rate. The company declared a final DPS of 3.1 sen, bringing its total FY11 DPS to 5.1 sen, which implies a decent payout ratio of 27.4%. On a quarterly basis, improvements are seen across the board with 4QFY11 revenue and net profit coming in at RM192.1m and RM11.6m respectively. 

Strong job wins YTD.  On a separate note, KimLun announced that it has secured a RM72.0m job awarded by Tanah Sutera Development for the construction of a shopping mall in Johor Bahru  slated to be completed by Nov 2012. With this, its orderbook now stands at RM1.45bn, of which a sturdy RM377.0m was won YTD. While we make no changes to our FY12 orderbook replenishment of RM600m at this juncture, we foresee a potential upside bias with the likely award of the tunnel lining segment (TLS) for the KV MRT SBK line  by April. Over the medium term, we expect to hear more from the Iskandar region while in the long run, we believe KimLun  will likely gain  a  stronger foothold in Singapore as we understand that a 35km underground cable tunnel is likely to be awarded this year, while a 50km Thompson Easter Region line is also in the pipeline.

BUY.  Though the earnings were within our expectations,  we revisited  our  model and tweaked our FY12 opex higher as we foresee  the  incurrence of start-up expenses in 1H12  to kick start its project of supplying  Supply Box Girders (SBGs). With that,  we revise  our FY12 net profit forecast downward by 7.4% to RM47.5m, while our FY13 estimates remain largely unchanged.  That said, we continue to like KimLun given its strong execution track record, sturdy job wins YTD, as well as its increasing presence in the  Johor and Singapore region. Hence, maintain our BUY call at  a revised FV of RM2.07 (from RM2.15 previously) based on an unchanged FY12 PER of 10x.

Source: OSK188