Friday 8 June 2012

Kimlun Corporation - OUTPERFORM - 08 June 2012


News   Kimlun announced that MMC-Gamuda KVMRT (T) S/B accepted  its offer to manufacture, supply and deliver precast concrete tunnel lining segments (TLS) for the Sg. Buloh – Kajang MRT line for RM48m.
  
Comments   We are neutral on this news as the contract award has already been factored in as part of our additional order book replenishment assumption of RM200m for FY12. The delivery of TLS will take place in 1Q13 when the initial MRT tunnelling work starts operation. This timeline is also in line with the completion of Kimlun’s new plant in Seremban for precast production. 

 This is the second contract award related to the KVMRT works for Kimlun. To recap, the first contract was secured in Feb 2011 for the supply of segmental box for MRT’s elevated works worth a contract value of RM223m. 

 We expect the gross margin for the project to hover around 20%, which would be in line with our margin assumption for its manufacturing division.
  
Outlook  For the year to date, Kimlun has successfully secured several projects in Johor and Klang Valley with a combined value of RM800m in FY12.

 Its current order book, which stands at c. RM1.7b, will last for another two years.   We believe that Kimlun is eyeing more building projects in Johor and Klang Valley. With its expertise in building precast, this will benefit them to secure government-related project and high-rise residential projects which require a 70% usage of IBS components.
  
Forecast  No changes to our earnings forecasts.
  
Rating Maintain OUTPERFORM
 There is an attractive upside of 20% to our Target Price of RM1.77.
  
Valuation   We maintain our TP of RM1.77 based on 8x PER on its FY13E EPS of 24.7sen.
  
Risks  Delays in executions and higher-than-expected building material prices.

Source: Kenanga

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