Kimlun has secured 2 contracts for precast manufacturing (RM80m) and construction of roads (RM144m). Orderbook is now estimated at RM2.2bn, implying a cover ratio of 2.2x. While these job wins are positive, we remain cautious on the macro job flow outlook following the new government’s review on mega projects. Forecast unchanged as YTD job wins are still within our target. Maintain HOLD, TP: RM1.66 (8x FY18 P/E).

NEWSBREAK

Wins 2 new contracts. Kimlun announced that it has been awarded 2 new contracts which are (i) supply of precast building components for SGD27m (RM80m) and (ii) construction of roads and interchange in Johor Bahru for RM144m and to be completed by Oct 2020.

HLIB’s VIEW

Pushing its orderbook higher. With these 2 jobs in the bag, we estimate Kimlun’s total orderbook (i.e. construction and manufacturing) to now stand at RM2.2bn. This translates to a healthy cover of 2.2x on FY17 construction and manufacturing revenue. We understand that this construction job is Kimlun’s first job win for the year while the YTD manufacturing sum is at RM120m.

Cautious on job flow outlook. While these contract wins are positive, we remain cautious on the overall macro job flow outlook. This follows from the new government’s move to put all mega projects under review which would inevitably result to project rollout delays or an outright cancellation.

Forecast. Unchanged as YTD construction job wins are still within our full year target of RM500m.

Maintain HOLD, TP: RM1.66. Maintain HOLD rating and TP of RM1.66 (8x FY18 P/E). While valuations are turning attractive following the post GE14 sell off, we remain cautious on the slowing macro job flow outlook.

Source: Hong Leong Investment Bank Research - 7 Jun 2018