Period 1Q12/3M12
Actual vs. Expectations
3M12 net profit of RM10.6m came in below expectations,
accounting for just 17% of our FY12E net profit of RM59.2m but in line with the
street’s estimate at 22% of RM49.5m.
Dividends No dividend was declared during this quarter.
Key Results Highlights
YoY, 3M12 revenue improved substantially by 47% from
RM134.6m to RM198.3m due to higher contribution from construction and
manufacturing by 49% and 39% respectively. This was also supported by increased
sales of TLS and jacking pipes in Singapore.
QoQ, the 3Q12 net profit fell by 9% from RM11.7m to RM10.6m
as the gross margin for construction came down by 2.3ppt from 10.9% to 8.6%.
This was due to a big proportion of the current order book being relatively
lower margin projects.
Outlook Its current
order book stands at RM1.7b, which provides earnings visibility for the group
up until FY14.
We believe that Kimlun would be able to secure more
contracts for the year mainly due to MRT contract flows and also potential new
building contracts in Johor and Klang Valley.
Change to Forecasts
We have cut
our FY12E earnings
by 20% from RM59.2m to RM47.3m as we have lowered
our margin assumption for its construction division from 13% to 11%.
Rating MAINTAIN OUTPERFORM
A potential upside of 20% to our Target Price of RM1.77.
Valuation Inline with our earnings cut, we have
lowered our Target Price from RM2.05 to RM1.77 based on an unchanged 8x PER on
its FY13E EPS of 24.7 sen.
Risks Higher than expected building material costs.
Stiff market competition which could further lower its
margins.
Source: Kenanga
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