Kimlun has secured RM54m contract for construction of roads earthworks, road and drainage and other ancillary site works for Gerbang Nusajaya Development in Johor Bahru. The works are scheduled to be completed by end of April 2019. With YTD job wins at RM198m, orderbook is now estimated at RM2.2bn, implying a cover ratio of 2.2x. 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

Bags new contract. Kimlun announced that it has been awarded RM53.5m contract from Nusajaya Rise Sdn Bhd for the execution and completion of earthworks, road and drainage and other ancillary site works for Gerbang Nusajaya Development in Johor Bahru. The works are scheduled to be completed by end of April 2019.

HLIB’s VIEW

Second construction job win. This is the second construction job win for the company which brings the YTD sum to RM198m. This brings Kimlun’s total orderbook (i.e. construction and manufacturing) to c.RM2.2bn which translates to a healthy cover of 2.2x on FY17 construction and manufacturing revenue.

Cautious on job flow outlook. While this contract win is 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. Although Kimlun’s clientele base is well diversified between the public and private sector, shortage of contract flows in the former could lead to more intense tendering within the latter for jobs.

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 - 21 Jun 2018