Highlights

HLBank Research Highlights

Author: HLInvest   |   Latest post: Fri, 13 Sep 2019, 9:27 AM

 

Kimlun Corporation - 2Q Results Below Expectations

Author:   |    Publish date:


Kimlun’s 1HFY18 earnings of RM22.5m (-26% YoY) were below both our and consensus expectations due to lower than expected construction margin and higher than expected finance costs. YTD core PATAMI decreased by 26% due to lower construction and precast concrete products margins. Kimlun has secured 2 new construction contracts with total value of RM198m YTD. Its outstanding construction order book now stands at RM1.7bn, translating to 1.9x cover on FY17 construction revenue. Cut both FY18-19 earnings forecast by 11.5% respectively after taking into account lower construction margin and higher finance costs. We introduce FY20 earnings of RM53.4m. Maintain HOLD rating with lower TP of RM1.52 (from RM1.66) following earnings cut but slightly offset by the roll forward of valuation horizon from FY18 to FY19. TP is pegged to 8x PE multiple.

Below expectations. Kimlun reported 2QFY18 results with revenue of RM218.0m (- 1% QoQ, +12% YoY) and core earnings of RM9.8m (-22% QoQ, -33% YoY). This brings 1HFY18 core earnings to RM22.5m, decreasing by 26% YoY. 1H core earnings accounted for 34% of our and 33% consensus forecast respectively which is below expectation. This is mainly due to lower than expected construction margin and higher than expected finance costs.

QoQ. Core PATAMI decreased by 22% mainly due to lower construction margin attributable to projects mix with higher composition of lower margin projects, partially offset by better margin in manufacturing division due to higher mix of better margin precast concrete products.

YoY/ YTD. YoY and YTD core PATAMI decreased by 33% and 26% respectively mainly due to lower construction and precast concrete products margins.

Construction. Kimlun has secured 2 new construction contracts with total value of RM198m YTD. Its outstanding construction orderbook now stands at RM1.7bn, translating to 1.9x cover on FY17 construction revenue. Management is targeting to secure another RM400-700m in new construction jobs for FY18. However, we maintain our order book replenishment assumption of RM500m given the slowing in contract flows following the change in government post GE14.

Manufacturing. YTD Kimlun has secured new sales order for tunnel lining segments and pre-cast concrete building components amounting to SGD39m (c.RM117m). Its manufacturing order book stands at RM400m, represents c.4.2x cover on FY17 manufacturing revenue. Going forward manufacturing job wins are likely to be driven by the Deep Tunnel Sewerage Phase 2 (SGD2.3bn) project in Singapore which has already been awarded to 5 main contractors that Kimlun will bid from to supply precast tunnel segments.

Forecast. Cut both FY18-19 earnings forecast by 11.5% respectively after taking into account lower construction margin and higher finance costs. We introduce FY20 earnings of RM53.4m.

Maintain HOLD, TP: RM1.52. Maintain HOLD rating with lower TP of RM1.52 (from RM1.66) following earnings cut but slightly offset by the roll forward of valuation horizon from FY18 to FY19. TP is pegged to 8x PE multiple. While valuations are turning attractive following the post GE14 sell off, we remain cautious on the slowing macro job flow outlook.

Source: Hong Leong Investment Bank Research - 30 Aug 2018

Share this
Labels: KIMLUN

Related Stocks

Chart Stock Name Last Change Volume 
KIMLUN 1.27 0.00 (0.00%)

  Patrick13 likes this.
 


 

50  58  325  1892 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 SAPNRG 0.30+0.02 
 ARMADA 0.33+0.025 
 SAPNRG-WA 0.125+0.01 
 ISTONE 0.205+0.005 
 HIBISCS 1.04+0.085 
 ALAM-WA 0.05+0.01 
 REACH-WA 0.055+0.005 
 ALAM 0.11+0.02 
 KNM 0.39+0.015 
 KNM-WB 0.195+0.015 

TOP ARTICLES

1. Why Investors fail? - Koon Yew Yin Koon Yew Yin's Blog
2. Saudi oil production cut by 50%. And here is the best oil & gas counter to play — Alam Maritim & its warrants BEST INVESTING IDEAS
3. A Relook into Bumi Armada from Profitability, Volume Spread Analysis and what’s Insiders Report are telling they are doing now ? TradeVSA - Case Study
4. POS - Special Thanks to KKMM Minister YB Gobind Singh Deo For Shedding Light on Tariff Hike Proposal !!! Investhor's Mighty Hammer of Wisdom
5. Four simple reasons why Alam Maritim can hit 20 sen Good stocks to share
6. When can ego be good and when can it be bad? Koon Yew Yin Koon Yew Yin's Blog
7. 中东局势混乱国际油价是否会继续往上移?? 大马股市在油气(Oil & Gas)板块有没有较低风险的隐形黑马吗? Ten Ninety
8. [转贴] 巴菲特告訴孩子:成為富有的人,一生只需要3種投資 Good Articles to Share
Partners & Brokers