- Kimlun Corp announced on Bursa Malaysia yesterday that it has won a RM296.4mil job to construct two towers of serviced apartments and ancillary buildings in Johor Bahru.

- According to the announcement, Kimlun’s wholly-owned subsidiary, Kimlun Sdn Bhd has accepted the letter of award from Wealthy Growth Sdn Bhd, a subsidiary of IOI Properties Bhd.

- The construction work of the job is expected to be completed by May 2016.

- The new job affirms our view of Kimlun – a Johor-based construction player – as a cheaper proxy to the surge in construction jobs in Iskandar Malaysia.

- With the new job, Kimlun has secured RM447mil worth of new construction jobs in Johor this year. This makes up 69% of our new order book assumption of RM650mil for FY13F (FY12:~RM800mil). We think Kimlun is able to achieve this target given accelerating construction works in Iskandar Malaysia.

- With the new job, we estimate Kimlun’s outstanding order book to be around RM1.2bil. CEO Sim Tian Liang has said earlier that would only focus on construction jobs with margins of 8%-10%.

- Apart from construction, Kimlun is also a proxy to MRT works in Malaysia and Singapore. In June, Kimlun secured a SGD17mil (RM43mil) to supply tunnel lining segments for the East-West Transmission tunnel project in Singapore.

- Other potential jobs include:- (i)Thomson MRT line in Singapore; (ii) KVMRT Line 2; (iii) other proposed extension of MRT network in Singapore ie. Eastern Region line, North East line extension.

- We maintain BUY on Kimlun with a fair value of RM3.28/share- based on a 20% discount to our SOP-derived value of RM4.10/share. It is currently trading at 5x-9x PER for FY13F-15F.

Source: AmeSecurities