News

• Buys land in Shah Alam. Kimlun announced that it has entered into an agreement of sale for RM68.4m with Melati Ehsan to purchase (i) 47 vacant detached lots; and (ii) 30 units of building lot each with double-storey-detached house erected. Both of which are located in Seksyen U10, Shah Alam consisting of total land areas of 81.9k sqm. The properties and land constitute all the unsold portions within Melati Ehsan’s development known as “Bukit Bayu@U10 Shah Alam”.

Comments

• More location details. The said land and properties are located next to Bukit Cherakah Forest Reserve and surrounded by established housing developments such as Bukit Jelutong, Kayangan Heights, Sunway Alam Suria and Cahaya SPK. It is about 5km away from the entrance of Guthrie Corridor Expressway that links to major highways such as North South Expressway and Federal Highway to PJ and KL. Also, it is 3km from the entrance to the DASH (under construction) that links to LDP.

• Development plans. Kimlun intends to carry out enhancements on the 30 detached houses and build bungalow units on the 47 vacant lots. However, no GDV details were revealed. The acquisition is only expected to be completed in 1Q20.

Risks

• Slow turnaround for this acquired land.

Forecasts

• Unchanged pending more details on the development details (i.e. GDV and timeframe) for the land.

• On a proforma basis, Kimlun’s net gearing would increase from its current 5.5% to 17.3%. However, if we were to also factor in its 3 other proposed land acquisitions in Johor, proforma net gearing would rise to 37.6%.

Rating

Maintain BUY, TP: RM2.65

• Although we forecast earnings to decline by 22% in FY17, we are positive on a recovery in FY18 (+20%) underpinned by its strong job wins leading to a record high orderbook.

Valuation

• Our TP of RM2.65 is based on an 11x P/E multiple ascribed to FY18 earnings (mean: 12x).

Source: Hong Leong Investment Bank Research - 29 Jan 2018