Kimlun announced that it has been awarded a RM204m contract by Rexpoint Resources Sdn Bhd for construction of 2 blocks of apartments in Selangor. The work is expected to be completed by end of January 2022. Maintain forecast and BUY rating with unchanged TP of RM1.58. TP is pegged to 8x FY19 earnings. We like Kimlun for its execution capability and undemanding valuations.

NEWSBREAK

Apartment contract awarded. Kimlun announced that it has been awarded a RM204m contract by Rexpoint Resources Sdn Bhd for construction of 2 blocks of apartments in Selangor. The work is expected to be completed by end of January 2022.

HLIB’s VIEW

First construction job win. This is the first construction job win for Kimlun and its outstanding orderbook currently stands at c.RM2.1bn which translates to a healthy cover of 2.6x on FY18 construction revenue. Management’s FY19 orderbook replenishment target of RM500-800m remains intact and future jobs bidding will be focused on affordable housing development.

Prospects in Sarawak. We expect Kimlun to be one of the beneficiaries of Sarawak’s robust development expenditure due to its established footprint in the state as one of the work package contractor in Pan Borneo Sarawak project. Sarawak state government has allocated c.RM9bn for development expenditure under state budget 2019 which is the biggest in the history of the state. Funding for those projects is expected to come from Sarawak’s state reserves (c.RM30bn) which may insulate the projects from risk of reduction of federal government spending.

Forecast. Maintain as YTD job win is within our orderbook replenishment assumption of RM500m.

Maintain BUY, TP: RM1.58. Maintain BUY rating with unchanged TP of RM1.58. TP is pegged to 8x FY19 earnings. We like Kimlun for its execution capability and undemanding valuations.

Source: Hong Leong Investment Bank Research - 30 Apr 2019