News Kimlun announced that it had secured a
contract worth RM88m from Setia Indah Sdn Bhd for the construction of
apartments and ancillary buildings in Johor Bahru.
Comments We are
positive on the contract, the value of which already made up 18% of our total
order book replenishment estimate for FY13 of RM500m. The project is slated for
completion in January FY15.
Based on Kimlun’s
historical track record, we expect the gross margin for the project to hover
around 10% to 11%.
Outlook To recap, 2012 was a good year for Kimlun as
it had successfully secured c.RM800m worth of projects, which had also exceeded
our expectations of RM550m. Some of the projects include the construction of
buildings in Johor and Klang Valley while the notable contract secured for its manufacturing
division was the pre-cast supply award from or MRT Co.
Moving forward, we
believe that Kimlun will continue to eye for more building projects (mainly in
Johor). We believe that Kimlun will continue to be competitive in building
projects, which require a 70% pre-cast component given its strong track records
and expertise in the Industrialize Building System (IBS).
It current order book
stands at RM1.7b, which would last it for the next 2 – 3 years.
Forecast No changes to our earnings forecasts.
Rating Maintain OUTPERFORM
We believe that
Kimlun is a strong beneficiary of the booming property market in Johor, which
could provide surprises on the upside such as in it securing more contracts than
expected.
Valuation We
are maintaining our TP of RM1.77 based on 7x PER of its FY13 earnings.
Risks Delays in contract executions and
higher-thanexpected building material prices.
Source: Kenanga
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