- We maintain BUY on Kimlun with a fair value of RM2.00/share – a 20% discount to our sum-of-parts value.

- We attended a briefing by the management yesterday. Among the key highlights from the meeting are:- (i) Kimlun had a balance manufacturing order book of RM300mil as at end-Dec 2013, comprising the KVMRT1 job as well as the tunnel lining segment (TLS) packages for the Singapore cable tunnel and downtown line. The bulk of the KVMRT job is expected to be recognised this year.

(ii) Depending on the timing of the TLS package awards under KVMRT2, Kimlun will utilise its Senawang plant to produce industrial building system (IBS) products. The Senawang plant is currently running at ~50% utilisation rate.

(iii) Kimlun also intends to utilise its Senawang plant to supply TLS for the upcoming Thomson line in Singapore. The management reckons that its Senawang plant could handle 3-4 packages under the Thomson line. (iv) We understand that there are 19 TLS packages under Thomson line, estimated to be worth ~SGD130mil in total. Kimlun will be able to supply TLS from both its Senawang and Johor (currently at ~80% utilisation rate) plants. The TLS package is expected to be awarded soon following the appointment of main contractors recently.

(v) With a balance construction order book of RM2bil as at end-Dec 2013, we expect new order wins to slow down in 1H14. About ~80% of the jobs are in Johor.

(vi) Its maiden project, HYVE, (GDV: RM235mil) has achieved a 70% take-up rate. It has unbilled sales of RM125mil and is expected to be completed by end-2015. Kimlun is still awaiting approval for phase 1 of its Medini Opus project (GDV: RM446mil) with a tentative launch scheduled for 4QFY14.

(vii) Kimlun intends to launch 41 bungalow units on a 386sq ft land that it is purchasing in Shah Alam. The group intends to sell these units (8k-13k sq ft plots) for between RM1mil-RM2mil each.

- Recall that 70% of its record new order wins of RM1.1bil last year were secured in 2H. Given the large size of jobs in hand, we expect new order wins to slow down in 1H14 with a new order book assumption of RM700mil. Maintain BUY.

Source: AmeSecurities