KimLun’s 9MFY12 core earnings of RM37.2m were within our and consensus estimates at 77.2% and 79.9% of the full-year forecasts respectively. There are no changes to our core assumptions for now. We continue to like KimLun for its solid outstanding orderbook of over RM1.7bn, which could last well into 1HFY14. Maintain BUY, with our FV retained at RM2.46, based on an unchanged 10x FY13 PE.
All is well. KimLun’s 9MFY12 revenue surged 43.7% y-o-y to RM661.1m, after having secured RM794m worth of new jobs in 1H this year. Its core earnings improved moderately by 19.7% to RM37.2m while its EBIT margin retreated 140bps to 8.2%, mainly due to the recognition of lower-yielding construction projects YTD. All in, the numbers were fairly in line with our estimates. On a quarterly basis, 3QFY12 revenue and profit came in at RM215.0m and RM11.8m respectively, which were weaker q-o-q on seasonal factors, but improved y-o-y across the board.
Negative operating cash flows not a major concern. On a side note, KimLun’s 9MFY12 operating cash flows closed at a deficit of RM61.6m, which may seem worryingly high at first glance. Nonetheless, we attribute this to the higher level of construction activities the group has carried out YTD. We believe the deficit would likely narrow once the billings on its newly secured projects commence.
BUY. With the numbers coming in largely in line, we make no major changes to our core assumptions at this juncture. All in, we continue to like KimLun given its strong outstanding orderbook of over RM1.7bn, which could last well into 1HFY14, as well as its solid management to drive the company’s future growth. Maintain BUY, with our FV retained at RM2.46, based on an unchanged 10x FY13 PE.
FYE Dec (RMm)
|
FY10
|
FY11
|
FY12f
|
FY13f
|
FY14f
|
Revenue
|
527.6
|
652.1
|
857.5
|
891.8
|
928.6
|
Net Profit
|
41.6
|
42.7
|
48.2
|
59.0
|
64.2
|
% chg y-o-y
|
17.6%
|
2.5%
|
12.8%
|
22.6%
|
8.8%
|
Consensus
|
47.4
|
55.2
|
62.1
| ||
EPS (sen)
|
17.3
|
17.7
|
20.0
|
24.6
|
26.7
|
DPS (sen)
|
5.9
|
4.9
|
5.0
|
6.1
|
6.7
|
Dividend yield (%)
|
4.3%
|
3.5%
|
3.7%
|
4.5%
|
4.9%
|
ROE (%)
|
28.8%
|
21.3%
|
20.6%
|
21.5%
|
20.0%
|
ROA (%)
|
12.1%
|
9.4%
|
8.6%
|
9.2%
|
9.1%
|
PER (x)
|
7.9
|
7.7
|
6.8
|
5.6
|
5.1
|
BV/share (RM)
|
0.77
|
0.90
|
1.05
|
1.23
|
1.43
|
P/BV (x)
|
1.8
|
1.5
|
1.3
|
1.1
|
1.0
|
EV/EBITDA (x)
|
7.3
|
5.6
|
4.4
|
3.7
|
3.8
|
Results Table (RMm)
FYE Dec (RMm)
|
3Q12
|
2Q12
|
Q-o-Q chg
|
YTD FY12
|
YTD FY11
|
Y-o-Y chg
|
Comments
|
Revenue
|
215.0
|
247.8
|
-13.2%
|
661.1
|
460.1
|
43.7%
|
9MFY12 numbers are fairly commendable, due to higher construction activities being carried out on sturdy job wins YTD
|
EBIT
|
17.6
|
21.5
|
-18.0%
|
54.1
|
44.1
|
22.7%
| |
Net interest expense
|
-1.8
|
-1.7
|
4.8%
|
-4.6
|
-1.9
|
137.7%
| |
Associates
|
0.0
|
0.0
|
0.0
|
0.0
| |||
PBT
|
15.8
|
19.7
|
-20.0%
|
49.5
|
42.1
|
17.5%
|
3QFY12 marked decent y-o-y improvement; numbers are weaker on a q-o-q basis, however, due to seasonal factors
|
Tax
|
-4.0
|
-5.0
|
-18.9%
|
-12.5
|
-11.1
|
12.3%
| |
MI
|
0.0
|
0.0
|
0.0
|
0.0
| |||
Net profit
|
11.8
|
14.7
|
-20.0%
|
37.2
|
31.0
|
19.7%
| |
EPS (sen)
|
4.9
|
6.1
|
15.5
|
12.9
| |||
DPS (sen)
|
0
|
0
|
0.0
|
2.0
| |||
EBIT margin
|
8.2%
|
8.7%
|
8.2%
|
9.6%
|
9MFY12 margins ended lower but as we have highlighted previously, this was due to the recognition of less profitable construction projects
| ||
NTA/Share (RM)
|
1.09
|
1.04
|
1.09
|
0.85
|
EARNINGS FORECAST
FYE Dec (RMm)
|
FY10
|
FY11
|
FY12f
|
FY13f
|
FY14f
|
Turnover
|
527.6
|
652.1
|
857.5
|
891.8
|
928.6
|
EBITDA
|
55.9
|
61.4
|
68.8
|
83.9
|
91.0
|
PBT
|
53.0
|
58.3
|
64.2
|
78.7
|
85.6
|
Net Profit
|
41.6
|
42.7
|
48.2
|
59.0
|
64.2
|
EPS (sen)
|
17.3
|
17.7
|
20.0
|
24.6
|
26.7
|
DPS (sen)
|
5.9
|
4.9
|
5.0
|
6.1
|
6.7
|
Margin
| |||||
EBITDA (%)
|
10.6%
|
9.4%
|
8.0%
|
9.4%
|
9.8%
|
PBT (%)
|
10.0%
|
8.9%
|
7.5%
|
8.8%
|
9.2%
|
Net Profit (%)
|
7.9%
|
6.5%
|
5.6%
|
6.6%
|
6.9%
|
ROE (%)
|
28.8%
|
21.3%
|
20.6%
|
21.5%
|
20.0%
|
ROA (%)
|
12.1%
|
9.4%
|
8.6%
|
9.2%
|
9.1%
|
Balance Sheet
| |||||
Fixed Assets
|
36.9
|
46.3
|
87.9
|
115.6
|
131.7
|
Current Assets
|
354.3
|
467.6
|
523.9
|
555.2
|
603.7
|
Total Assets
|
391.2
|
513.9
|
611.8
|
670.8
|
735.3
|
Current Liabilities
|
200.6
|
280.2
|
338.8
|
350.0
|
364.9
|
Net Current Assets
|
153.7
|
187.4
|
185.2
|
205.2
|
238.8
|
LT Liabilities
|
6.2
|
17.5
|
20.8
|
24.3
|
25.8
|
Shareholders Funds
|
184.4
|
216.1
|
252.3
|
296.5
|
344.7
|
Net Gearing (%)
|
Net Cash
|
Net Cash
|
10.7%
|
5.5%
|
Net Cash
|
Source: OSK
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