Period 4Q12/FY12
Actual vs. Expectations Kimlun’s FY12 net profit of RM49.3m came in
within ours and the consensus estimates, accounting for 104% of ours and the
consensus FY12 estimates of RM47.3m and RM47.8m respectively.
Dividends A single tier dividend of 4.8 sen was proposed
as expected.
Key Results Highlights QoQ, Kimlun’s net profit grew
marginally by 3% to RM12.2m albeit a revenue growth of 10% due to its operating
margin compression of 2.3ppt to 5.3%.
YoY, its pretax profit declined by 27% from RM15.8m
to RM11.6m given a margin compression of 3.5ppt from 8.4% to 4.9% as its
financing cost rose 82% to RM2.2m and there were lower margin construction jobs
recognised. The construction margin declined by 3.7ppt from the double digit
level of 10.9% to just the mid-single digit level of 7.2%.
YoY, the full year FY12 net profit improved by
16% to RM49.3m, underpinned by the robust revenue growth from its construction
(+34%) and manufacturing (+92%) divisions and a lower effective tax rate of
19.4%.
Outlook Its
current order book remains strong at RM1.6b, which will provide earnings
visibility for the group for the next two years. We believe that 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 the Klang Valley.
With its expertise in precast construction, we believe that this will enable it
to stand a higher chance to secure government-related projects and high-rise
residential projects, especially in the Iskandar region.
Change to Forecasts There are no changes to our FY13-FY14E
earnings estimates.
Rating Maintain
OUTPERFORM
Our OUTPERFORM recommendation is maintained as
there is 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 7.0x 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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