- We maintain BUY on Kimlun Corp Bhd with an unchanged fair value of RM2.00/share – a 20% discount to our sum-ofparts value.

- Kimlun posted 1QFY14 net earnings of RM19.5mil (+117% YoY, +78% QoQ).

- Excluding an EI gain of RM10.8ml from the disposal of its Nilai land, core net profit would be RM8.7mil – making up

16% and 17% of our and consensus full-year estimates.

- Top line grew by 56% YoY to RM335mil (QoQ: +22%) due to higher contributions from its construction and manufacturing divisions.

- Construction revenue rose by 33% to RM233.7il due to higher recognition of new jobs that were secured last year. Recall that Kimlun won RM1.1bil worth of construction jobs last year, out of which 70% was secured in 2H. However, gross margin had contracted to 7% from 9% YoY due to higher costs.

- Manufacturing revenue rose by 15% due to higher recognition for the supply of tunnel lining segments (TLS) to the KVMRT project. Margin was lower at 15% (vs. 19% a year earlier) due to higher depreciation of new plants.

- 1Q also saw significant contribution from its property division (revenue of RM54mil), due to higher development progress of its HYVE project (GDV: RM235mil) in Cyberjaya.

- Kimlun has an estimated balance order book of RM2.1bil (construction: RM1.8bil, manufacturing: RM400mil) as at

end-March 2014. We expect construction margins to remain around ~7% as most of the jobs secured are for high-rise buildings which require sub-contractor services.

- Earnings for its manufacturing will continue to be driven by its current jobs, which include the supply of TLS and segmental box girders (SBG) for KVMRT1 (RM270mil) and the cable tunnel job (SGD17mil or RM43mil).

- Recall that in March, the group won a SGD20.5mil package to supply TLS to the Thomson MRT line. We understand that a total of 19 TLS packages (worth ~SGD130mil) under the Thomson line are up for grabs.

- On its property front, HYVE has achieved a 70% take-up rate with unbilled sales of RM131mil. Its Medini Opus phase 1 project (GDV: RM446mil) is slated for launch in 4QFY14F.

- We maintain our earnings forecast for now as Kimlun will recognise higher contribution from its current jobs in the coming quarters. Maintain BUY.

Source: AmeSecurities