- We maintain HOLD on Kimlun Corp Bhd with a lower SOP-based fair value of RM1.56/share (vs. RM1.65/share earlier), as we tweaked our model. We attended a company briefing yesterday.
- YTD, the group has secured RM152mil worth of new construction jobs (vs. last year’s record new order book of RM1.1bil). This is not surprising given the macro slowdown in Johor as well the impact of the cooling measures imposed on the property market by the government.
- Given the slowdown in new property launches in Johor, management noted that it has been selective in bidding for new jobs while its capacity is tied to the current jobs at hand. Nevertheless, management indicates that it is looking to secure RM600mil worth of new jobs this year.
- As for its manufacturing division, the group has secured ~RM70mil worth of new jobs YTD. This includes Package 205 of the Thomson line (SGD20.5mil/RM52mil) that was secured in March.
- Moving forward, the group is looking to secure more tunnel lining segment (TLS) packages under the Thomson line. With a total of ~SGD150mil worth of packages up for grabs, Kimlun is hoping to secure ~30% of that.
- Recall that as at-end June, the group had an outstanding order book of RM1.8bil (construction: RM1.52bil; manufacturing: RM270mil).
- We understand that the TLS package for KVMRT1 (RM48.5mil) was completed in August, while another
~RM100mil (half of the original contract value) of the segmental box girder (SBG) for the line will be completed by 1H15.
- Currently, 63% of its outstanding manufacturing order book is for the Singapore market. Nevertheless, we expect margins to remain subdued as SBG’s margins are lower compared to that of TLS. This is in addition to the impact from higher depreciation costs.
- Meanwhile, its construction margins will also continue to be impacted by higher manpower costs, due to more high-rise projects which require specialist and subcontractor services.
- On its property arm, the RM235mil HYVE project in Cyberjaya has had a 73% take-up rate (as at 19 Sept), with unbilled sales of RM123mil as at end-June. As for its Opus Medini project (GDV: RM240mil), the group intends to have a soft launch for phase 1 by year-end.
- We maintain HOLD given the current macro slowdown in the Johor market while margins remain under pressure.
Source: AmeSecurities
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