THE BUZZ
KimLun announced that it had accepted the letter of award
from Esquire Corner SB for the construction of apartments and ancillary
buildings in Shah Alam, Selangor for a total contract sum of RM148.5m.
Construction is expected to be completed by Sept 2014.
OUR TAKE
Hits FY12 orderbook replenishment target. The announcement,
which was a positive surprise, boosts
KimLun’s jobs secured YTD to an impressive RM745m.
Going into 2H12, KimLun has already exceeded our expectations by
achieving almost 100% of our full-year orderbook replenishment forecast of
RM750m. Assuming a quarterly burn rate of RM200m-RM250m, the company’s
outstanding orderbook of RM1.77bn should last it well into 2HFY13. We make no
changes to our assumptions for now, although we note that there is upside
potential should the group secure the supply of tunnel lining segments
to the KV MRT SBK line, as well as some possible jobs from the Singapore MRT’s
new line expansion.
More jobs likely.
KimLun has already submitted a bid for the supply of tunnel
lining segments (TLS) to the KV MRT SBK line, which we gather may be officially
awarded this month. Although there is a possibility of the TLS portion being
split into various packages and shared among KimLun and local boys such as Hong
Leong Industries and MTD ACPI, we still
think KimLun has a chance of securing at least a third of the works given the company’s
current involvement in Singapore’s MRT extension. Meanwhile, we understand that the group is looking to
secure more works from Singapore, with
the tenders for the 35km
underground power transmission cable comprising 2 tunnels having closed at
end-February and expected to be officially awarded towards end-2012.
BUY. Going
forward, we expect the flow of construction
contracts to accelerate in the run-up to the impending
general election. 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 our BUY call, at an unchanged FV of RM2.37, based on a FY12
PER of 12x.
Source: OSK188
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