Period 3Q12/9M12
Actual vs. Expectations
The 9M12 net profit of RM37.2m came in
within our and the consensus estimates, accounting for 79% of ours and the
consensus’ FY12E net profits of RM47.3m and RM47.4m respectively.
Dividends No
dividends were declared during this quarter.
Key Results Highlights
YoY, Kimlun’s net profit continues to grow by 20%
from RM31.0m to RM37.2m underpinned by the robust growth of 44% in its revenue
of RM661.1m albeit a margin compression of 1.5ppt from 12.2% to 10.7%. The
robust growth in the revenue was mainly due to the recognition of construction
projects in FY11 and contribution from new projects secured in FY12 while the margin
contraction was mainly due to a lower gross profit derived from its
construction division.
QoQ, the 3Q12 net
profit declined by 20% from RM14.7m to RM11.8m due to a lower revenue recognised
from its construction division, which saw a drop by 13.7% to RM192.9m
(previously RM223.5m) as certain new projects have yet reached their peak
levels yet.
Outlook Its current order book remains strong at
RM1.7b, which will provide earnings visibility for the group up to FY14. We
believe the huge order book will keep Kimlun busy throughout these years.
We believe that
Kimlun will continue to bid for more building projects with better margins in Johor
and Klang Valley. With its expertise in precast construction, we believe this
will enable it to stand a higher chance to secure government related projects
and high-rise residential projects.
Change to Forecasts There are no changes to our FY12-13E earnings estimates.
Rating MAINTAIN OUTPERFORM
Outperform
recommendation maintained as it has a potential upside of 29% to our Target
Price of RM1.77. The strong order book provides a good earnings visibility for
the group.
Valuation We are
maintaining our Target Price of RM1.77 based on a 8x PER on its FY13E EPS of
24.7 sen.
Risks Higher
than expected building material costs.
Stiff market
competition that could further lower its margins.
Source: Kenanga
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