- We reaffirm our BUY rating on Kimlun Corporation (Kimlun)
with our fair value kept at RM2.20/share.
- Kimlun recorded a net profit of RM14.7mil for 2QFY12,
bringing its 1HFY12 earnings to RM25.4mil (+19% YoY) which came within our
expectations. No dividend was declared for the quarter. Earnings also grew by a
healthy 39% QoQ on the back of a strong growth (+25%) in revenue.
- This was mainly due to stronger turnover from the
manufacturing and trading division, underpinned by stronger orders for the
Tunnel Lining Segment and jacking pipes to Singapore. EBIT margins were also
better this quarter (9% versus 8.5%) as a result of economies of scale.
- Going forward, earnings would be supported by strong
unbilled sales of RM1.8bil (2.7x FY11 revenue).
- Kimlun has already bagged new contracts worth close to
RM800mil, which is a record win for the company. While this is already above
our order book renewal assumption of RM700mil, we are keeping our estimates
unchanged.
- The bulk of the contracts would likely be booked in FY13F
and this should see strong growth in earnings – at an estimated 20% YoY growth.
- While the newsflow on KV MRT packages has peaked, Kimlun
can still look forward to more jobs in Singapore. The group is one of the
frontrunners to supply TLSS to Singapore’s underground cable tunnel project,
which we gather worth is S$100mil. We gather that the contracts will be awarded
by end of the year, albeit in small packages. Past records indicate Kimlun had
won 70% of available tunnel lining packages in Singapore.
- We continue to like Kimlun because of its attractive
valuations – currently trading at FY13F PE of 6x, well supported by 3-year
earnings CAGR of 20%.
Source: AmeSecurities
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