• Kimlun Corporation Berhad (Kimlun) is a one-stop provider of  engineering services, offering a comprehensive and integrated  range of concrete products and engineering and construction  services to a diverse range of clients.

• The company’s outstanding orderbook stood at RM1.7bn as at FY22,  equivalent to 2.2x of FY22 revenue. The company set a target of  securing new contracts between RM800mn-RM900mn in FY23,  pushing its total orderbook to exceed RM2bn.

• Outlook for FY23 orderbook replenishment is favorable,  underpinned by; i) Pan Borneo project, ii) Sarawak Autonomous  Rapid Transit, iii) Johor Bahru - Singapore RTS project, and iv) MRT3.

• Kimlun does not have an official dividend policy though it has been  paying dividend every year with payout ratio of up to 44% since  2010.

• Kimlun is currently trading at a PER of 7.4x, which is broadly in line  historical average of 7.9x, suggesting that the stock is fully valued.  The stock deserves a re-rating in our view given: i) its strong  presence in Singapore's precast concrete market, ii) solid oderbook  to support earnings, and iii) imminent public infrastructure project  rollouts.

One-Stop Engineering Service Provider

Kimlun was first incorporated as Kimlun Earthworks Sdn Bhd in October 1977. It was then listed on the Main Market of Bursa Malaysia in 2010. The company initially undertook building construction and infrastructure  projects with contract values of less than RM20mn each. In 2003, Kimlun secured their first >RM20mn contract for construction of apartments  and townhouses upon broadening its construction services which include larger scale building and infrastructure construction, as well as  heavy engineering work. As part of their strategy to secure projects,  Kimlun underwent a series of incorporation and acquisition processes involving multiple companies (Refer Chart 1). In 2002, SPC Industries Sdn  Bhd (SPC), a subsidiary of Kimlun, began its precast concrete business  and was subsequently contracted to supply concrete sewerage tunnel  segments for the Pantai Trunk Sewerage Bored Tunnel project in Kuala  Lumpur. The company also started their footprint in overseas market  through the supply of concrete tunnel lining segments for Singapore MRT  project in 2005. Their first property development in HYVE Soho Suites,  Cyberjaya, boasts with a Gross Development Value (GDV) of RM232mn  which marked their foray in property segment.

Diversified portfolio

Kimlun involves in 3 main sectors: i) construction and engineering in  both building and infrastructure projects (71.2% of FY22 revenue), ii)  manufacturing and trading, consists of precast concrete and quarry  products (24.6% of FY22 revenue), and iii) property development (4.2%  of FY22 revenue) (Refer Chart 2). Kimlun‘s property segment is comprised of SOHO and offices as well as landed houses. They currently have a landbank size totalling c.283.3 acres. (Refer Table 1).

Source: BIMB Securities Research - 1 May 2023