KimLun's FY11 net profit of RM41.8m  came in within our expectations and consensusat 102.2% and 98.1% of the respective full-year estimates. It declared a finalDPS of 3.1 sen, bringing its FY11 DPS to 5.1 sen at a payout ratio of 27.4%. Withthe RM223m supply of SBGs  for the KV MRTalready in its bag, we believe the next re-rating catalysts will likely be  the supply  of  TLS for the KV MRT SBK line, further jobs for the Singapore MRT expansion  and developments in  the Iskandar region. Hence, maintain BUY withour FV marginally lowered to RM2.07 to account for the potential 1H12 opexspike.

Numbers in line.KimLun's FY11 revenue registered RM652.1m, up 23.6% y-o-y led by improvementsin both its construction and concrete product divisions. EBIT closed the yearat RM61.4m, marking a 21.6% improvement over the same period as  its margin declined slightly on higher depreciationand admin expenses. All in all, net profit inched up by a smaller quantum of16.7% y-o-y to RM42.7m due to higher tax leakages, which saw a 300bps y-o-yjump in the effective tax rate. The company declared a final DPS of 3.1 sen,bringing its total FY11 DPS to 5.1 sen, which implies a decent payout ratio of 27.4%.On a quarterly basis, improvements are seen across the board with 4QFY11 revenueand net profit coming in at RM192.1m and RM11.6m respectively. 

Strong job wins YTD.  On a separate note, KimLun announced that ithas secured a RM72.0m job awarded by Tanah Sutera Development for theconstruction of a shopping mall in Johor Bahru slated to be completed by Nov 2012. With this, its orderbook now standsat RM1.45bn, of which a sturdy RM377.0m was won YTD. While we make no changesto our FY12 orderbook replenishment of RM600m at this juncture, we foresee a potentialupside bias with the likely award of the tunnel lining segment (TLS) for the KVMRT SBK line  by April. Over the mediumterm, we expect to hear more from the Iskandar region while in the long run, webelieve KimLun  will likely gain  a stronger foothold in Singapore as we understand that a 35km undergroundcable tunnel is likely to be awarded this year, while a 50km Thompson EasterRegion line is also in the pipeline.

BUY.  Though the earnings were within ourexpectations,  we revisited  our model and tweaked our FY12 opex higher as we foresee  the incurrence of start-up expenses in 1H12 to kick start its project of supplying Supply Box Girders (SBGs). With that, we revise  our FY12 net profitforecast downward by 7.4% to RM47.5m, while our FY13 estimates remain largelyunchanged.  That said, we continue tolike KimLun given its strong execution track record, sturdy job wins YTD, aswell as its increasing presence in the Johor and Singapore region. Hence, maintain our BUY call at  a revised FV of RM2.07 (from RM2.15previously) based on an unchanged FY12 PER of 10x.

Source: OSK188