KimLun reported 1QFY12 earnings of RM10.6m, coming in line
with our and consensus expectations by
meeting 22.3% and 21.4% of the respective estimates. We expect the
subsequent quarters to show stronger earnings as activities pick up,
especially with its outstanding orderbook balance standing at RM1.7bn. Moving
into 2H12, we believe it could potentially bag more jobs from the tunnel lining
segment of the KV MRT and the underground cable tunnel in Singapore. All in
all, maintain BUY at an unchanged FV of RM2.37 based on 12x FY12 PER.
Numbers in line.
KimLun reported 1QFY12 revenue of RM198.4m (+47.4% y-o-y) and core earnings of
RM10.6m (+11.0% y-o-y). In comparison to the corresponding quarter in 2011,
1QFY12 numbers marked some decent improvements across the board thanks to its
sturdy orderbook of RM1.7bn as of March 2012. However, margins were impacted by
a decline of 170bps at the net level and 310bps at the gross level due to lower
construction margins recognized during the quarter. By the same token, 1QFY12
core earnings closed 8.8% q-o-q lower despite the 3.3% q-o-q growth in the
group’s top-line that was driven by the higher activities in its manufacturing
division. All in all, we deem the results within our expectations as net profit came in at 22.3% of our full-year forecast.
More jobs ahead.
Going into 2H12, KimLun has already
met our expectations by bagging some RM745m worth of new jobs YTD
against our full-year orderbook replenishment target of RM750m. Assuming a
quarterly burn rate of RM200m-RM250m, the company’s outstanding orderbook of
RM1.7bn should last well into 2HFY13. We expect to hear more developments on the
potential award of the tunnel lining segment (TLS) of the KV MRT by MMC-Gamuda.
We understand the TLS portion could be worth RM400m-RM500m but it is
likely to be divided into at least 2 packages, and KimLun could also be in the running for
some possible jobs from Singapore, including
the construction of a 35km underground power transmission cable tunnel
and potentially more works from expansion of the MRT system.
BUY. Going
forward, we expect the flow of contracts in the construction sector to accelerate
in the run-up to the general election, which is now rumoured to be held after 28
Sept, which is the day for tabling Budget 2013. In light of this, we see KimLun
as our best small-cap proxy play given its involvement in the KV MRT project
and Singapore’s MRT extension. Hence, we maintain a BUY at an unchanged FV of
RM2.37, based on our revised FY12 PER of 12x.
Source: OSK
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