News

Secured S$20.5m (approximately RM53.3m) Tunnel Lining Segment (TLS) contract for the Thomson Line of Singapore MRT project from Shanghai Tunnel Engineering Co. Ltd. The supply of the TLS is expected to spread over a period of approximately 36 months.

Highlights

Good win… The latest Thomson Line TLS order represents 27% of FY13’s manufacturing revenue and 18% of its existing manufacturing order book of RM290m. It also represents 27% of the division’s RM200m order book replenishment target for FY14.

Strength in precast… Kimlun continues to prove itself as a specialist in the precast segment and has been a key supplier for various infrastructure projects in Singapore and also for our local KVMRT project.

Backlog orders… Overall, Kimlun has an outstanding construction order book RM2bn (2.6x FY13’s construction revenue), RM343m manufacturing orders (1.7x FY13’s manufacturing revenue) and RM100m unbilled property sales.

Risks

Execution risk; Regulatory and political risk (both local and abroad); Rising raw material prices; and Unexpected downturn in the construction and property cycle.

Forecasts

Unchanged as the latest contract win is within our expectations.

Rating

HOLD

Maintain HOLD call in view of less than 10% upside from our Target Price.

Positives: (1) Key beneficiary of Iskandar building projects and Pengerang developments; (2) Growing property development contribution; (3) Success in supplying precast products in Klang Valley.

Negatives: (1) Slower than expected recovery of its construction division; (2) Slower than expected take-up rates for its property projects.

Valuation

Maintain Target Price of RM1.60 based on unchanged 10x average FY14-15 earnings.

Source:Hong Leong Investment Bank Research- 27 Mar 2014