• Profile. KIMLUN is primarily involved in construction and the manufacture of concrete products. Its construction division is mainly involved in building jobs for property developments in Johor, while its concrete products are mainly used in the construction and expansions of MRT lines in Malaysia and Singapore.
• The group is an excellent proxy to MRT Line 2 given it track record of supplying 50% of the tunnelling lining segment (TLS) and segmental box girders (SBG) for MRT Line 1. It is also one of the beneficiaries of the 11MP in which the group could participate in the railway’s material s upply jobs (i.e. TLS and SBG).
• Undemanding valuations. At RM1.34, KIMLUN is trading at 9.8x FY15 P/E (in line with its 5-year historical average of 9.5x) and 0.79x P/BV (42% below its 5-year historical average 1.36x), supported by a 3.8 sen tax-exempt final dividend for FY12/2014 (ex on 21 July). We think such valuations and dividend have provided a sufficient margin of safety and cushion further share price decline.
• Poised to scale higher towards RM1.41-1.53 territory amid bullish technicals. Since hitting a 2-year low of RM1.15 on 16 Dec 14 from a high of RM2.28 on 11 Jun 13, KIMLUN’s s hare prices began to trend upwards to close at RM1.34 yesterday.
• Share prices had also closed marginally above the ST resistance trend line (from a high of RM1.43 on 23 Jan) as well as its 200-day SMA. A sustainable close above 200-d SMA in the next 2-3 days is essential and could send prices higher to retest RM1.41 (23.6% FR), RM1.46 (200-w SMA) and our long term objective of RM1.53 (100-w SMA) in coming weeks, supported by positive daily and weekly oscillators.
• Supports are pegged at RM1.30 (20-d SMA) and RM1.26 (27 May low). Cut loss below RM1.23.

Source: Hong Leong Investment Bank Research - 26 Jun 2015