At our recent visit
to KimLun following the release of its
4QFY11 results, management said the jobs flow
may continue to gush,
with a number of forthcoming contracts including the TLS of KV MRT SBK line and Singapore’s MRT
and NEWater extension. Its orderbook
has hit a new high of RM1.62bn, of which RM597m is secured YTD.
All in, we like KimLun’s execution track record as well as strong contract wins
to date. Hence, we maintain BUY, at a revised FV of RM2.37, based on 12x FY12
PER and an enlarged share base, following
the completion of the first 5% tranche of its proposed private
placement.
Sturdy
RM1.62bn-strong orderbook. KimLun
orderbook has reached a record RM1.62bn,
of which RM597m worth of jobs was secured this year. These comprise the supply
of segmental box girders to the Klang Valley MRT SBK line worth RM223m and 5
building jobs in Johor worth a combined RM374m, of which 2 jobs with a total
value of RM152m were announced yesterday. Of the RM1.62bn worth of contracts,
some 80% is from its construction segment while the remaining RM310m comes from
its precast concrete division. Following a brief meeting with the company’s
management, we took a look at each of its core focus areas to gauge the
contracts it can potentially win, as well as the jobs outlook for some of its
existing and new business segments in the near term.
More works likely
from MRT. KimLun has submitted a
bid for the supply of
tunnel lining segment (TLS) to the KV MRT SBK line, which
we gather may be officially awarded
latest by May this year. Management said
there is a possibility of the TLS portion being
split into various packages and shared among KimLun and other local boys
such as Hong Leong Industries and MTD ACPI. That said, we continue to like KimLun’s
chances of securing at least a third of the works given its track record via
its current involvement in Singapore’s MRT extension. In the long run, we see
potential jobs for KimLun from the widely anticipated 2 new KV MRT lines
currently known as the Circle line and Northwest-Southeast line. We also
understand that about 50% of the former may run underground across the city,
which could translate into potential TLS contracts amounting to >RM500m,
assuming a total value of RM20bn for the said line.
Contracts from
Singapore could pick up in 2H12. In
2011, KimLun’s operations in Singapore
contributed 7% of the group’s topline.
Going into 2H12, we understand that the group is looking to secure more works from the island, with tenders
for the 35km underground power
transmission cable comprising 2 tunnels having closed at end-Feb and expected
to be officially awarded out towards
end-2012. We continue to see opportunities in the medium
term as the Singapore government has announced plans to build 2 more rail lines
totaling 48km. Meanwhile, management has
highlighted the possibility of contracts from NEWater in relation to water
transmission pipes as well as a sewerage system with a combined length of some
50km.
Source: OSK188
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